KPMG for more FI funds in anti-money laundering

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Chennai: The financial institutions in the country need significant investments and huge improvement in their anti-money laundering systems, says a study. In its latest report — The Indian Anti-Money Laundering Survey 2009 — KPMG indicated a positive attitude towards AML regulations. As many as 79% of respondents believe the burden placed upon them is acceptable. While 45% respondents feel the existing requirements are sufficiently geared to address money laundering risks, 34% say it could be better focused on (see chart).

Money laundering has become a board room issue with senior management playing an active part in AML compliance. The results, when considered separately, appear to be positive in terms of organisations’ near-universal satisfactory adoption and implementation of the risk-based approach to combat money laundering in organisations. However, when analysed, the results appear conflicting. This could be because the concept of AML is still developing in India.

For example, though politically exposed persons have been identified as one of the key factors for risk consideration, a large number of respondents (45%) still do not have procedures in place to identify them. Nearly 42% do not have an automated procedure for sanction list monitoring, essential to ensure that sanction list monitoring happens at every stage from account opening to transaction monitoring.

Also, even though 70% respondents believe they have an effective system for transaction monitoring, it has still been identified as an area needing major improvement, hence a priority for investment. Besides, a large number of respondents are still adopting the traditional approach to transaction monitoring in preference to sophisticated IT tools.

Arpinder Singh, executive director, KPMG India said, “India’s escalating global exposure is also rendering its financial institutions vulnerable to money laundering. The ratification of the Prevention of Money Laundering Act in 2005 has made AML an essential compliance for FIs in India. They have to play a pivotal role in addressing the issue by assisting regulators and law enforcement managers to fight this crime.” He added, “With India aspiring to become a member of Financial Action Task Force, it is essential that it commits to the implementation of wide ranging requirements of the task force. This should include an independent review of policies and processes.”

Stashing away wealth

79%Of the respondents show a positive attitude towards the AML regulations

45%Of the respondents feel the existing requirements were sufficiently geared to address money laundering risks

34%Feel the existing requirements could be better focused