According to a recent Fenergo Report, financial institutions and people around the world were penalized a total of USD$10.6 billion in 2020 for noncompliance, with anti-money laundering (AML) violations accounting for 99 percent of those fines.
Qinthara Fasya | 16 August 2021
All policies and pieces of law requiring financial institutions to monitor their clients in order to prevent money laundering are referred to as anti-money laundering (AML). Financial institutions must report any financial crime they detect to relevant agencies under AML legislation.
Money laundering has become an increasingly common problem over the last year due to the Covid-19 pandemic . Financial institutions and governments are always looking for innovative ways to combat money launderers, and numerous anti-money laundering regulations have been implemented to aid in this endeavour.
The Goal of AML
Anti-money laundering (AML) aims to prevent criminals from transferring their illegal monies into the financial system. Money laundering is a technique used by criminals to conceal the true source of money obtained through criminal activity.
Soon after the Financial Action Task Force was established, anti-money laundering regulations were enacted around the world. Most anti-money laundering rules were developed by the FATF, which established a framework for countries to follow. Following the implementation of this framework, the FATF began systematically identifying nations that lacked adequate anti-money laundering legislation. This “name and shame” strategy aided in motivating governments to change their legislation and begin properly implementing existing policies. The FATF now has 37 countries as members.
According to Comply Advantage, financial institutions are required to observe anti-money laundering legislation, but that does not mean they agree with them. Many banks have recently expressed their distaste for anti-money laundering rules, believing that they are both costly and ineffectual. Millions of dollars are spent each year in Europe and America alone to try to control and stop money laundering. However, many people are beginning to conclude that the current anti-money laundering systems are mainly ineffective, and that the money spent on them is not worth the doubtful results.
AML in the Asia Pacific
A recent Fenergo report on global financial institution fines concluded that the APAC region saw the single biggest regional increase of financial institution fines in 2020. Banks engaged in the 1MBD scam and an Australian bank entangled in a high-profile money laundering case were among those receiving the worst enforcement actions from regulators in APAC, including the Malaysia Securities Commission and AUSTRAC in Australia.
Countries that issued the most fines by value:
- Malaysia $ 3,900,000,000
- Australia $ 921,587,910
- Singapore $123,075,897
- Hong Kong $107,806,257
- China $100,104,187
- India $15,689,920
- Pakistan $11,713,330
In July 2019, the FATF released its most recent Terrorist Financing Risk Assessment Guidance. In January 2020, the EU’s Fifth Money Laundering Directive went into effect. The sixth order will be issued in December, just on the heels of the fifth.
Many CFOs will be directly affected by these developments. Money laundering laws will apply to all organizations that provide financial services, regardless of size, according to Elaine Smyth, CIMA’s assistant director–Professional Standards.
Senior oversight of AML/CTF processes is the responsibility of each business. This is a role that does not always fall to the CFO. When it occurs, though, finance chiefs must ensure that they are aware of the dangers and have processes in place to mitigate them.