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Risk-based laundering approach yields little fruit
A MOVE to a risk-based approach to anti-money laundering (AML) regulation in the UK has not resulted in cost-benefits for financial services firms there, according to recent research.
While Australia’s AML framework has been built from the ground up using the risk-based approach, the UK Financial Services Authority (FSA), which regulates AML, replaced existing rules with a risk-based approach in early-2006. The idea was to deliver a better outcome at lower cost, but a survey from PricewaterhouseCoopers (PwC) suggests the jury remains out on cost-benefit.
While more than 90 per cent of those polled said they had implemented the new approach, 82 per cent have not noticed any cost-benefits. Of those, 64 per cent don’t expect to ever see benefits and an alarming 86 per cent were unable to quantify their total spend on AML compliance in the previous year. A UK study put the cost of AML compliance at more than $500 million for the financial services sector.
“It is reassuring to see that the UK financial services industry is taking the right steps to combat money laundering,” said Andrew Clark, a partner in AML at PwC.
“But it is clear that progress still needs to be made, at a time when there has never been greater pressure on financial institutions to ensure their anti-money laundering controls are fit for purpose. Financial institutions are making major investments in AML controls and it is important for them to know whether the money is being well-spent. We would urge greater attention to the costs involved to help meet the challenges of tackling economic crime.”
The biggest challenge going forward, the PwC report said, will be technology implementation and staff training followed by the need to work towards global standards. While the Financial Action Task Force’s (FATF’s) recommendations form the basis of many AML regulation approaches and are designed to facilitate global consistency, regional approaches to money laundering vary widely, despite the global nature of the threat.
The PwC report also found that organisations attempting to tackle money laundering are looking for greater guidance and clearer explanations from the regulator.
10-Aug-2007
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