Financial firms say they need to dedicate more resources to their anti-money laundering (AML) programs and focus more on regulatory risk - the risk associated with the potential for laws to change and impact relevant investments, according to a new survey by London, UK-based Ernst & Young.The 125 global financial firms who took part in the survey said they spent between $10 million and $50 million in the last year on people, technology and outside help as part of their anti-money laundering efforts.
But 35% of those surveyed said their level of spending was insufficient.
The study revealed that institutions need to focus on managing regulatory risk through open dialogue and communication with regulators - in particular companies that have a global footprint.
Today, all financial institutions globally are required to monitor, investigate and report transactions of a suspicious nature to the financial intelligence unit of the central bank in the respective country. They face penalties for failing to properly file Cash Transaction Reports and Suspicious Activity Reports.
Ernst & Young said 43% of respondents believe it is critical for firms to adopt a risk-based approach for the success of an AML program.
The three areas of highest emerging risk that respondents would address if they had the resources are regulatory risk (identified by 36% of respondents), prepaid/cash cards (32%) and Shell companies/LLCs (18%).
"Risk-based solutions are important to ensure sure your resources and spend are targeted to the right areas," says Steve Beattie, global AML services leader at Ernst & Young. Beattie says firms will spend more on AML technology this year. " Vendors are stepping up their solutions: there is more integration, case management integrated with monitoring. Technology is a key component."
Currently, Beattie says organizations are trying to reduce false positives, and to reduce the error potential of manual solutions. "They continue to move towards increased automation," he says.
Meanwhile, Chris Maher, Principal Risk Advisory Services, Ernst & Young, underlines that it is essential for industry dialogue to continue in the AML space. "Organizations have to compare notes on the challenges they're facing. No one firm gets everything right."
He adds that firms need to have a practical plan of how they close gaps and address control deficiencies.
"They have to keep on updating their risk assessment. They need to focus on technology. The challenge is in getting the technology in place, fully enabled, and making it an effective part of a company's AML program," Maher says. "There should be alignment and collaboration between the AML team, technology, and business sides of the organization."Financial firms say they need to dedicate more resources to their anti-money laundering (AML) programs, and focus more on regulatory risk, according to a new survey by Ernst & Young. Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio