The Asia-Pacific is considered the world’s most wayward region when it comes to reporting financial crimes.
Eighty seven percent of APAC respondents in financial institutions have admitted to consciously choosing to violate the laws and incur anti-money laundering (AML) fines either “all the time”, “regularly”, or “occasionally”.
These APAC numbers are greater than the global average of 80%, with the figures for North America and Europe being 79% and 75% respectively, a report by ComplyAdvantage, entitled The State of Financial Crime 2021, found.
Conducted in Q4 2020 across North America, Europe, and APAC, 600 C-suite and senior compliance decision makers coming from enterprise banking, investments, crypto, insurance, and fintech organisations were surveyed.
Of the three APAC markets surveyed, Singapore-based respondents were the most law abiding with 72% saying they will violate laws and incur fines – followed by Hong Kong (90%) and Australia (95%).
Individuals in industry are not playing their part
This attitude amongst banking leaders and compliance professionals undermines global and APAC governments’ efforts to fighting financial crime, which has been on the rise since the onset of Covid-19.
Crimes rates have been increasing due to the great amount of public funds flowing through the international financial system, and the heightened use of digital payments as enterprises and purchases move online.
“As a results of Covid-19, 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,” said Jaede Tan, Managing Director of ComplyAdvantage Asia Pacific.
“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.”
Other insights from the 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 Covid-related crimes that exploit accelerated digitalisation.
- 94% of APAC respondents stated that real-time AML risk data would improve their compliance operations. This is because today’s environment, banking transactions that take even minutes to clear would degrade customer service.
- Fraud is 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’ pain points in 2020. With 55% of APAC respondents ranking cybersecurity as a top pain point.
- 65% of APAC respondents plan on upgrading their legacy systems in 2021.
- 59% of APAC respondents plan on replacing or upgrading their transaction monitoring system in 2021.
These findings illustrate the need for high quality AML data amid higher risk appetites, and the urgency for financial institutions to be nimble and granular in their approach to combatting fast evolving financial crimes.
Recommendations to ensure compliance
Moving forward, in their efforts to ensure compliance, financial institutions should ensure that they:
- Constantly monitor global regulations to identify changes, and understand the different types of criminal activity that are prevalent in the jurisdictions in which they operate.
- Put in place processes and technologies to ensure that enterprise-wide risk assessments capture new threats and risks created by Covid-19. As new technologies are onboarded and new payment methods and channels are introduced, firms should document associated AML and counter financing of terrorism (CFT) risks; and how they are managing them to ensure that they do not expose their firms and customers to enhanced financial crime threats.
- Have robust, flexible and integrated screening and monitoring systems to navigate the complexities of the different types of financial crimes.
