Banks burn a lot of money to prevent money laundering


A quarter of the professionals who completed the questionnaire indicated that

investments in anti-money laundering have doubled in the last three years and 80 per cent of them reported an increase in investments.

These sums are primarily spent on systems development, customer data updates, and regulatory compliance.

While banks typically spend more than half of their human resources in the area of ​​compliance on preventing financial abuse, it is particularly important to be able to monitor changes in the regulatory environment with integrated and automated solutions.

Overwhelming majority, about 90 percent indicated that investments in automated solutions are fundamental improvements to money laundering prevention activity.

Half of the respondents use a customized service from an external service provider in this area. New technologies are gaining ground artificial intelligence and machine learning also, although the human decision has not yet been triggered by these solutions either.

“Regulatory pressures and money laundering trends increasingly require a preference for complex analytics and technology solutions. Complex money laundering techniques such as trade-based money laundering, where illegal actors take advantage of the complexity of international trade, would be difficult to detect without artificial intelligence or big data analysis. ” Says András Kaszap, KPMG’s forensic director.

According to the survey, the biggest challenges in involving external service providers are the difficulties of integration with the bank’s existing systems and the costs. “Based on our experience, it often happens that when purchasing such systems and services, they do not take full advantage of the opportunities provided by new technologies, for example, they use group-level settings that are not optimal for monitoring the domestic environment,” adds András Kaszap. “

An important measure of banks’ anti-money laundering activity is the proportion of alerts and notifications to the competent authorities, which according to the respondents are below 5%. The use of advanced technologies can also significantly reduce the number of false positive alarms and help detect unusual transaction patterns.

The survey concludes that a culture change is also needed for the money laundering prevention system to work effectively: it is not enough to rely solely on compliance as a second line of defense. This requires training in the first line of defense so that their knowledge of financial abuse approaches their colleagues in the second line of defense. The role of senior management in managing money laundering risks and in approving the related framework can also be critical.

“The tasks related to the prevention of money laundering have increased tremendously in both international and domestic institutions, which necessitates a rethink of the lines of defense in a large number of large banks,” says Péter Szalai, KPMG’s Director of Financial Risk Management. One of the key findings of the survey is that data quality plays a critical role in the cooperation of lines of defense and 52 percent of respondents said that ensuring data quality should be the responsibility of the first line of defense, i.e. the business area.

Another critical area in the fight against financial abuse is fraud prevention and the fight against corruption. 77 percent of respondents indicated that the greatest difficulty in the latter is caused by insufficient regulatory controls. Poor law enforcement action was cited by 36 percent as a reason.

The analysis also looks at how market participants are performing in certain areas of financial abuse prevention:

  • In the areas of framework, regulations, transaction monitoring and training, compliance with the new requirements will allow professionals to do so after meeting previous supervisory requirements.
  • In the area of ​​customer identification and data management, the fines imposed suggest that previous expectations have not been fully met, so that increasing regulatory rigor poses new challenges for banks.

Cover image source: Getty Images.


Source: Portfolio.hu – Bank by www.portfolio.hu.

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