‘Banks need to take long-term view to curb money laundering’

New Delhi: Banks need to take a wider and long-term view, apart from trying to meet the minimum regulatory requirements, to curb and avoid money laundering activities, according to a survey by Deloitte.

The ‘South Asia Anti-Money Laundering Preparedness Survey Report 2020’, prepared by Deloitte Touche Tohmatsu India LLP, showed that regulators expect banks to have a consolidated view of customers and their transactions across businesses and jurisdictions, to identify unusual transactions and behaviour, or potential sanctions violations.

“Apart from investing a significant amount of money in systems and people, banks need to take a wider and long-term view (instead of trying to meet minimum regulatory requirements),” it said.

The top three focus areas identified by respondents during the survey for better anti-money laundering (AML) compliance in the future included customer due diligence, control effectiveness and sustainability, and use of AI and bots to improve alert generation and reduce false positives.

The survey conducted with leading banks and financial institutions in India, Sri Lanka, and Bangladesh earlier this year, highlighted “siloed risk management” approaches across banking operations, customer due diligence, sanctions screening, and trade-based transactions as the root cause for systemic inefficiencies leading to fraud.

According to the survey, meeting increased regulatory expectations and enforcing AML compliance pose key operational challenges to banks, even as 81 percent respondents indicated that their AML programme was compliant with all regulatory requirements. These challenges range from reliance on manual processes, inadequate data, and the inability to recruit or retain skilled staff.

K.V. Karthik, Partner, Forensic, Financial Advisory, DTTILLP noted that historically, AML programmes have been incident-driven with lean teams to manage response to events, or changes in regulatory developments, but that is no longer adequate in the current scenario.

“With increased regulatory scrutiny and expectations being ‘if you could have known, then you should have known’, banks need to move to a proactive approach to demonstrate their compliance to avoid fines, rather than rely on the traditional reactive approach. This calls for investments in an integrated enterprise-wide approach to manage compliance and prevent failures,” he said.

Such an approach that provides a comprehensive view of customers and transactions can make it difficult for criminals to exploit gaps between business systems, databases and countries, Karthik added.


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