Fraud prevention & security
A global effort against money laundering
Despite the record fi nes meted out to the banking and fi nancial services sector recently, money laundering is increasing year after year. But governments and regulators are pushing back globally – with consequences for fi nancial services of all types. Martin Morris talks to experts across the banking industry to understand the scale of the money laundering challenge, how new regulations might help keep banks within the law – and why new rules need to be shadowed by better training and technology.
ast year was a fruitful one for global regulators. A total of $10.4bn in fines were imposed across the banking and financial services sectors, covering a range of infractions – with everything from anti-money laundering (AML) and know your customer (KYC) to data privacy infractions all featuring. Even so, these successes quickly pale when compared with the estimated $2.1trn that financial crime costs the global economy each and every year. To put it another way, staying ahead of the criminals and their avalanche of fraud can prove remarkably tough for governments and officials alike. That’s true even when new regulations promise to boost the fight against fraud. The EU’s new AML Directive (AML6), due to be fully implemented in June this year, is a case in point. Put simply, the new regulations significantly widen the scope of data banks now need from clients. Combined with some thoughtful analysis – and better technology – the new rules have a chance to stop the worst money laundering offences in their tracks.
L $800bn
The estimated amount of money laundered in one year, or 2–5% of global GDP.
United Nations 48
Too much information? When trying to understand the customer’s field of business, it’s important for banks to obtain enough information to spot fraud. Yet as Marius Galdikas, CEO of online banking services provider ConnectPay explains, older legislation comes fraught with problems. Between uncertainty about how much information banks need to collect – and the related fear of non- compliance – he says that banks have often placed “excessive demands for the customer, which increases friction and damages the overall customer experience.” In other words, says Galdikas, the historical situation leaves little room for financial institutions to manoeuvre between compliance and facilitating a smooth KYC process. AML6, however, promises to change all this. By harmonising the definition of money laundering across the EU, and specifying exactly when banks are liable in the event of a crime, it makes the whole KYC process far simpler. In the payments sphere, the
introduction of ISO 20022 from next year will mean the creation of a common global language for payments data, and bring about a number of enhancements to the global payments network. Against this backdrop, moreover, digitalisation in the banking sector continues apace – presenting significant opportunities when it comes to battling financial crime. As Daniel Mikkelsen, a senior partner at McKinsey puts it, more data-driven approaches are being introduced across the spectrum of financial crime risk management. That ranges “from advanced analytics to monitoring transactions and identifying suspicious patterns or networks, to the use of better-connected data sets to identify events that indicate that clients pose a higher crime risk for financial institutions.” Among other things, Mikkelsen continues, this is driven by regulatory technology firms looking to innovate beyond legacy systems and processes – common across the bigger financial institutions.
Taking predicate offence
All well and good. From a practical standpoint, however, once the new rules become fully operational, and new technology comes online, there is every likelihood that financial institutions will have to train or remind some employees to take account of the new and expanded risk environment. After all, core to any bank’s governance – in terms of AML strategy at least – is the robustness of its KYC procedures. And, given the regulatory environment is becoming increasingly complex, the cost of making a mistake is potentially high. A perfect example of this is the money laundering scandal that rocked several northern European countries in 2019. The scandal’s waves initially washed up at Latvia’s ABLV, before moving on to the Estonian branch of Danske Bank, and later drawing in Swedbank – with the Nordic bank subsequently firing its chief executive and most of the board in the aftermath.
Future Banking /
www.nsbanking.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57
