Anti-money laundering slips on board agendas

Board level interest in anti-money laundering (AML) is being squeezed by other priorities, according to KPMG’s 2011 Global AML survey, with more firms risking “massive” fines.

The study revealed a 9% drop in boards considering AML to be a high profile issue (from 71% in 2007 to 62% in 2011), as company chiefs focus on survival and regulatory change.

Meanwhile the operational costs of AML have risen by an average of 45% since 2007, with a further 28% increase predicted over the next three years and the estimate probably on the light side, given the optimistic nature of previous industry forecasts in this area.

Despite this rising expenditure, only 10% of respondents had off-shored or outsourced parts of their AML functions, with 80% having never considered this as an option.

On anti-bribery and corruption activities, the 2011 research noted a greater focus on Politically Exposed Persons (PEPs): since the 2007 survey, the number of respondents with formal processes to identify and monitor PEPs has increased from 71% to 88%.

KPMG’s head of anti-money laundering, Brian Dilley, comments: “As the Arab Spring of 2011 is prolonged into summer and beyond, it is interesting to see that financial institutions across the globe have had the foresight to up their game by adopting a risk-based approach to knowing your customers, as the majority (96%) now use PEP status as a risk factor”.

Regarding KPMG’s warning on the risk of “massive” fines, in July, the Financial Services Authority (FSA) fined Willis £6.895 million for failings in its anti-bribery and corruption systems and controls.

The broker had made payments totalling £27 million to overseas third parties who assisted it in winning and retaining business from overseas clients, without ensuring that it established and recorded an adequate commercial rationale for its actions

The penalty is the biggest imposed by the FSA to date in relation to financial crime systems and controls.

Tags: anti-bribery and corruption, anti-money laundering, KPMG, research, survey

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