aml the new reality -...
TRANSCRIPT
AML – The New Reality February 2017
Slide 2
Regulatory Outline
According to a survey by world bank 75% of the large
international banks have reported a decline in their
correspondent banking relationships due to De-risking
80% Authorities in US have indicated that dollar wire transfer is the most affected service in 2015 due to the
cutbacks
$32.14 Billion - Fines imposed on entities around the globe for AML related offences between 2001 -
2016, interestingly Uganda’s national GDP in 2013 was $22.6
billion
BDT 5.6 Million - Fine levied by Regulators
in Bangladesh - AMLMaps™
Correspondent banking is core to the business of over 3,700 banking groups in 200
countries - IMF
The Cost of AML Fines Soars to over US $45 Billion - AMLMaps™
A recent study revealed that 40% FIs terminated or restricted
business relationships in 2015 with certain client categories due to perceived regulatory risk and
compliance cost
$50,000 per year per bank - Due diligence costs for a high-risk counterparty for a large bank
– SWIFT white paper
Major Impact of De-risking is on Embassies, Money Service
Businesses & Foreign Correspondent Banks (FCBs)
“Some of the biggest banks have halved, or more than halved, their
relationships, particularly in emerging markets. In some cases,
they have exited countries completely.” - Steve Beck , Head of
Trade Finance, ADB
$1 Billion – a rough estimate of money send by migrants in the United States to other countries,
every week
Slide 3
Regulatory Actions
The causes for increase in AML actions are – • enhanced global
cooperation & coordination and pressure on tax havens & equivalent regimens
• on-ground activation of
laws by regulators & agencies
• technological
advancements
Source
6 46 45
1193
531
8,541
404
1,101 1,092
144
9,595
2,371
6,755
13,064
1,618
6 8 17
76
55
22 25 37
75
166
143
291
343
390
356
0
50
100
150
200
250
300
350
400
450
K
2000M
4000M
6000M
8000M
10000M
12000M
14000M
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No
. of
Re
cord
s
Pe
ne
ltie
s In
Mill
ion
s
Year Wise Penalties (in million) & Actions
Total Penalties No. of Records
Slide 4
Reason for Penalties Count of Penalties* Penalties (in millions)
Money Laundering 640 2,187
Deficiency of AML Program 471 11,205
Deficiency of KYC Norms 292 409
International Sanctions Violation 18 13,119
Bank Fraud 37 18
Ponzi Schemes 31 1,100
Drug Trafficking 120 402
Investment Fraud 25 6,061
Deficiency of AML Program and Deficiency of KYC Norms are the two most used methods for which penalties have been imposed globally
Regulatory Fines & Penalties
*Count since the year 2000
Source
Slide 5
USA has been the leader in convicting individuals for money laundering followed by UK, Malaysia, Thailand & Hong Kong
Former Chairman of Board along with Founders have been one of the most convicted professionals amongst individuals. This trend is expected to continue & grow.
Imprisonments have increased post 2012, reflecting the intent of regulators to establish personal liabilities on individuals, even for organization centric AML actions
2 1 2 2 5 6 8 11 17 20
52
170 165
89
2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Records Involving Imprisonments
Former Chairman of Board
Chief Compliance
Officer
Founder Chief
Operating Officer
Owner
Former President
Former Prime Minister
Former Chief Executive Officer
President
Chief Executive
Officer
Individual | Penalties & Imprisonments
Source
Slide 6
Banking, Financial services and Insurance :
Analysis & Comparison
636
521
67
$25,374 Mn
$7,870 Mn
$8,685 Mn
BFSI Individuals
Non BFSI
324
35
10
45
222
$17,821 Mn
$6,210 Mn
$807 Mn
$263 Mn
$272 Mn
Banks
Financial Services
Investment Banking
Money Services Business
Others
Count of Fines
Count of Fines
BFSI vs Individuals vs Non-BFSI
BFSI Only
Banking, Financial services and Insurance (BFSI) entities (~70% banks) by virtue of being at the center of AML norms & actions, have attracted more than 60% of the total penalties
AML actions against Banks constitute 50% of all records but around 75% of all penalties. This clearly reaffirms the status of Banks being most at risk, by AML regulators.
Source
Slide 7
De-risking | Impact on Banks
Key Drivers
► Decrease in profitability
► Lack of confidence in AML
procedures of the CB partner
► Reputational risk
► Pressure from other actors
► Fear of regulatory scrutiny
Undermines Financial Inclusion
Affects Financial Transparency
Adverse affect on Regulatory Compliance
Overall impact on global trade
Lost Revenue & Profit
Migration of customers to smaller banks
Impact
Slide 8
Global de-risking is leading to decline in correspondent banking relationships and stifling $15 billion payments industry in Bangladesh
Increase in Fines & Penalties. Bangladesh has seen 80% increase in penalties on financial institution since 2012 - AMLMaps™
82% of the total penalties have been imposed due to Deficiency of AML program - AMLMaps™
Deficiency of AML program has become the highest focus for Bangladesh Regulator for imposing penalties followed by money laundering - AMLMaps™
Information & Compliance reporting requirements have increased in a major way
Other country regulators are indirectly penalizing banks and their foreign branches - AMLMaps™
De-Risking | Effect in Bangladesh
Slide 9
Key Areas of Concern
Inadequate Due Diligence
Lack of Continuous Monitoring
Technology
Insufficient AML expertise
Slide 10
Management Oversight
Transaction Monitoring
Training & Resources
Org Structure Independence Policy & Review Reputation
Scenarios & Optimization Technology Alerts & STRs Investigations
Frequency Content Coverage Compliance Organization Monitoring
KYC
Screening
Regulatory Compliance
CDD/EDD Renewals Global/Third Parties
Independent Testing Coverage Methodology Risk Based
Risk Based Framework Customer Industry
Product Geography
Coverage Lists & Sources Thresholds & Disambiguation
Reporting Internal Controls Record Keeping
The AML Diagnostic
AML Program Health Check for your organization
