The cost of anti-money laundering (AML) measures has risen dramatically for banks around the world, as the task of fighting criminals becomes more difficult due to the increasing complexity of financial markets.
That was the conclusion of a new report by KPMG Forensic, which found the greater exposure of financial institutions to emerging markets and the dramatic growth of alternative assets to be major contributory factors to rising AML costs.The study among 224 banks from 55 countries found that banks’ spending on AML systems and processes has risen by 58% on average over the last three years. In north America, the Middle East and Africa, spending has increased by 70% or more.
These increases far exceed banks’ own predictions when KPMG Forensic carried out its last study in 2004, when respondents on average predicted an increase of 43%. The biggest spending continues to be on transaction monitoring and staff training costs.
Despite previously underestimating the likely level of future spend, the banks surveyed predicted an increase of only 34% in their AML spending over the next three years.The survey also found evidence that banks feel transaction monitoring systems need to be enhanced, as 97% of respondents stated they are dependent on the vigilance of staff to monitor and identify suspicious activity, and 34% are not satisfied with the effectiveness of their transaction monitoring systems.
One result of the increased spending has been a 70% increase in suspicious activity reports, with 42% of banks noting a substantial increase.
“With international banks bolstering their presence in emerging market economies, and with a low interest rate environment driving growth in alternative assets including hedge funds, private equity and commodity investments, the need for more stringent AML processes has only grown. Banks will need to work extremely hard if they are to maintain any advantage in the war against money laundering and terrorist financing,” said Karen Briggs, global head of AML at KPMG Forensic.