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Anti-Money Laundering

Money Laundering continues to be a significant problem across the world, with some estimates putting the value of illicit funds channelled through the financial services sector at up to $2 trillion.

Whether it’s anti-money laundering (AML) or counter-terrorist financing (CFT), there’s no question that regulation is getting tougher, more frequent, and more expensive to manage: global spending on AML compliance could top $8bn by 2017. It’s also costing more not to comply with it, with larger fines and a potentially disastrous impact on corporate reputations. This is reflected in the global survey results, with the two biggest challenges identified as the pace of regulatory change and the lack of skilled staff.

The Middle East challenge

The Middle East region has special challenges here, with an unusually wide range of both international banks and local banks with a global presence. There is also a very high level of money service businesses and cash transactions, combined with global trading hubs and a geographical proximity to unstable or sanctioned locations.

What’s interesting is the sharp discrepancy between the global and the Middle Eastern results in these two key areas. We recognise the difficulty in securing skilled resources in the region, and this clearly shows the increased demand from financial institutions to get the right people.

71% of Middle Eastern respondents have been through a regulatory inspection in the last two years compared to 50% globally

How would your organisation fare in the face of regulatory scrutiny?

1 in 6
financial services respondents have experienced enforcement actions by a regulator
More than 20%
of financial services firms have not conducted AML/CFT risk assessments across their global footprint
of financial services respondents cite challenges with data quality
... only 52%
of money laundering or terrorist financing incidents were detected by system alerts
... and 35%
claim that the ability to hire experienced staff is the biggest challenge to AML compliance

Detecting AML or CFT activity

The emphasis Middle Eastern companies are playing on ‘Know Your Client’ measures is very much on point. Whether you’re a bank or another type of business, you need to know who you’re dealing with. This has never been more important than it is now, with so much business being transacted remotely, with people you will never meet. But by doing business that way you are – in effect – putting your brand in their hands.

As in other areas of economic crime, data collection and analysis can play a hugely helpful role, both in monitoring and detecting potential AML or CFT activity. New digital infrastructure could cut costs and improve efficiency, but many banks are hampered by cumbersome unconnected legacy systems that are no longer fit for purpose, but are too expensive and difficult to change. 35% of respondents in the Middle East say data quality is an issue (as against 33% globally), 18% are struggling with upgrading or implementing systems (24% globally), and 34% have systems that generate large numbers of false positive alerts (23% globally).

Most significant challenges with respect to AML/CFT systems

Complexity of implementing / upgrading systems
Data quality and maintenance of client information in electronic format
Local language issues
Monitoring systems generating large numbers of false positive alerts
Data privacy limitations on information sharing across jurisdictions

The emphasis Middle Eastern companies are playing on ‘Know Your Client’ measures is very much on point.

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