The cost of fighting money laundering has risen dramatically for banks across the world as they have become increasingly engaged in the struggle against criminality. The banks spending on anti-money laundering (AML) systems and processes has risen by an average of 58% over the last three years, said a global study done by KPMG Forensic.
Though there has been a marked shift in the attitude of Indian banks management involvement in AML, but the task is becoming more difficult due to the increasing complexity of the financial markets in which they operate, including greater exposure to sometimes unfamiliar emerging markets and the dramatic growth of alternative assets, the study pointed out.
As compared to a global average increase of 58% over the last three years, the spending in the North America, Middle East and Africa has even crossed 70% or more. These increases are far in excess of banks’ own predictions of 43% in 2004. The biggest spending continues to be on transaction monitoring and staff training costs.
According to the study, senior management are getting more involved in AML, with 71% of banks saying directors at the highest level are actively involved in it, up from 61% in 2004. Most respondent banks (85% of the 224 banks surveyed in 55 countries), have a global AML policy, ranging from a high of 100% in North America to a low of 58% in Middle East and Africa.
However, there is a major concern among banks that governmental and international regulation needs to be more effectively targeted. Half of respondents said they believe that while the overall regulatory burden is acceptable, the requirements need to be better focussed while one out of 10 believe that the regulation should be actually
increased in order to combat money laundering more effectively. Banks are also making greater efforts to identify politically exposed persons (PEPs) who could be the conduits for laundered money. Seven out of 10 banks said they perform enhanced due diligence on PEPs. Despite all the efforts, it is clear that significant challenges remain. Globally 41% of banks said they were not capable of tracking across countries and 26% were only partially capable.