Asia-Pacific AML regulations spurring compliance drive

Money-laundering transactions are thought to total approximately two to five per cent of global GDP each year – which is anywhere between $1 trillion (£772 billion) and $2 trillion.

 

The figures, compiled by the United Nations Office on Drugs and Crime, also reveal that authorities seize less than one per cent of these illicit money streams.

 

It is unsurprising, therefore, that money laundering and terrorist financing have become an increasingly frustrating challenge for global governments to overcome.

 

Anti-money laundering (AML) and terrorist financing regulations were highlighted as a top ten risk facing Asia-Pacific businesses last year, with banks and other FIs under a growing compliance burden.

 

This has resulted in significant regulatory changes in recent years in an effort to stay ahead of criminals and prevent financial institutions (FIs) from becoming complicit with such activity.

Compliance budgets on the rise

A recent survey from LexisNexis estimated that Asian banks in Thailand, China, Indonesia, Hong Kong, Malaysia and Singapore set aside $1.5 billion annually to cover AML compliance.

 

These figures roughly correspond with our own research. We estimate that major international banks spend between $900 million and $1.3 billion a year to combat financial crime.

 

The primary motivations for strengthening compliance in this area were regulatory necessity (cited by 28 per cent of LexisNexis respondents) and a desire to improve business results (21 per cent).

 

But not all banks are thrilled with these obligations; 55 per cent said AML compliance is negatively affecting their productivity, while 15 per cent believed regulations threatened their ability to do business.

 

More than four-fifths of organisations expect compliance costs to rise in the future, with one-third suspecting expenses will jump more than 20 per cent.

 

Watchlist activities are currently the most expensive, including Know Your Customer processes, sanctions operations and periodic screening.

 

Meanwhile, Asian banks aren’t quite up to speed with new customer onboarding procedures – just 15 per cent complete Customer Due Diligence activities in less than one hour.

Australia struggles to keep up with AML changes

The LexisNexis report only studied six countries, but AML problems extend across the Asia-Pacific region, including Australia.

 

Commonwealth Bank of Australia (CBA) is currently facing a money-laundering probe, with Reuters reporting that the country has historically lagged behind global counterparts when tackling money-laundering issues.

 

The Australian Transaction Reports and Analysis Centre (Austrac) is suing the bank for more than 53,700 alleged breaches of AML and terrorist financing laws.

 

Austrac claims the bank failed to report approximately AU$77 million (£47.3 million) of suspicious transactions made through intelligent deposit machines. These ATMs allow customers to anonymously deposit and transfer cash while the bank is closed.

 

CBA said it had hired 50 compliance professionals since 2015, but many organisations are struggling to find qualified staff to meet demand.

 

“In the last few years, regulators and banks have been focused on changing the whole bank culture to get all levels of staff taking compliance seriously,” stated Philippa Allen, CEO of ComplianceAsia.

 

“That is not as widespread yet in Australia. Australian banks have not had the big fines imposed on them like their global peers have.”

 

A Thomson Reuters survey last year revealed that 62 per cent of Australian FIs hadn’t made the necessary changes to meet AML recommendations that the Financial Action Task Force (FATF) put forward in 2012.

Asia’s shortage of compliance professionals

Thomson Reuters noted that retaining good compliance staff remains one of Asia’s biggest regulatory challenges for FIs.

 

The organisation said there has been a “huge increase in demand” for experienced professionals over the last five years.

 

“Financial institutions must be aware that if they fail to treat compliance staff properly or fail to provide sufficient development opportunities for them, they may lose the very skills they need to protect the organisation,” the company said in its report.

 

A shortage of compliance skills in Asia comes at an interesting time for UK-based professionals.

 

Our latest research revealed that the job market has tightened in Britain, and compliance employees are becoming dissatisfied with remuneration, as salaries, bonuses and pensions decline.

 

Brexit is also a concern. We found that 50 per cent of compliance professionals would consider relocating if the UK’s split from the EU harmed their career plans.

 

Our survey focused on other European locations, but Asia may become an increasingly attractive option if the right opportunities arise.

 

Australia could prove especially enticing for English speakers – 78 per cent of British-born compliance professionals don’t speak another European language.

 

That’s not to say compliance opportunities are flagging in the UK. Our data showed that AML advisory remains the most sought-after financial crime skill set.

 

Ultimately, AML and terrorist funding is a key area of focus for global regulators, suggesting that highly skilled compliance professionals will have their pick of the best jobs both at home and abroad.

 

If you’d like to know more about Asia compliance roles, or vacancies closer to home, please get in touch with one of our consultants today.

 

Our 2017 Compensation and Market Trends Report combines our review of the prevailing conditions in the compliance recruitment market together with the results of our latest employer survey.

 

Image: designer491 via iStock