Report a financial crime dutifully? Nah, we’re Asians

A small global study has indicated that the APAC region is comparatively more amenable to violating AML laws than anywhere else.

A Q4 2020 report on global financial crime has found the Asia-Pacific region (APAC) to be the most wayward in compliance with anti-money laundering laws.

The survey of 600 C-suite and senior compliance decision makers in enterprise banking, investments, crypto, insurance and fintech industries across North America, Europe and three APAC countries showed that up to 87% of APAC respondents had consciously chosen to violate laws and incur anti-money laundering (AML) fines—“all the time”, “regularly” or “occasionally”.

The global average was 80%, and the figures in North America and Europe were 79% and 76%, respectively. Among the APAC markets surveyed—Australia, Hong Kong and Singapore, the latter respondents were the most law abiding (only 72% violated laws and incurred fines), followed by Hong Kong (90%) and Australia (95%).

APAC financial crimes trends

Other APAC insights from the global report include:

• Suspicious activity report (SAR) filing was on the rise with 76% of APAC respondents saying they filed more SARs in 2020 than the previous year. This could be due to the higher number of pandemic-related crimes that exploited accelerated digitalization.
  
• 94% of APAC respondents stated that real-time AML risk data would improve their compliance operations. This was because in today’s environment, banking transactions that take even minutes to clear could degrade customer service.
  
• Fraud was a significant contributor to financial crime in 2020, with 68% of APAC respondents ranking improving fraud detection as their highest priority. Tackling fraud is important because it directly addresses criminal activity and protects institutions from immediate and significant financial losses.
  
• Cybersecurity and third-party risk management were noted as financial institutions’ biggest compliance-related pain points in 2020, with 55% of APAC respondents ranking cybersecurity as a top pain point.
  
• 65% of APAC respondents planned on upgrading their legacy systems this year.
  
• 59% of APAC respondents planned on replacing or upgrading their transaction monitoring system this year.

As far as the specific survey results are concerned, the above findings by ComplyAdvantage highlight the need for high quality AML data amid higher risk appetites, and the urgency for financial institutions polled to be nimble and granular in their approach to combating fast evolving financial crimes.

Said Jaede Tan, Managing Director, ComplyAdvantage Asia Pacific: “As a result of the pandemic, financial institutions today handle a much higher volume of digital payments, many of which need to be processed near instantly. Few of them have the processes and technologies in place to be able to carry out due diligence checks and where necessary, block the transactions, in milli-seconds. In the interest of maintaining profit, financial institutions often let unknown or even questionable transactions go through. This exposes them to punitive action from the authorities and, of course, reputational damage.”

According to Tan, such a negative compliance attitude among banking leaders and compliance professionals undermines global and APAC governments’ efforts to fight financial crime, which has been on the upswing since the onset of the pandemic. The firm recommends that, going forward, financial institutions should:

• Constantly monitor global AML regulations to identify and understand changes prevalent in the jurisdictions in which they operate.
  
• Ensure that enterprise-wide risk assessments capture new threats and risks as new technologies are onboarded and new payment methods and channels are introduced.
  
• Document associated AML and counter financing of terrorism (CFT) risks and management processes to prevent expose firms and customers to enhanced financial crime threats.

Finally, financial institutions need robust, flexible and integrated screening and monitoring systems to navigate the complexities of the different types of financial crimes.