david luijerink and jeremy allen, kpmg forensic - global perspective: a look at the financial...

ANTI-MONEY LAUNDERING SUMMIT 2014

Global perspective: A look at the financial services industry’s global

response to money laundering

12 September 2014

KPMG presenters:David LuijerinkJeremy Allan

1© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International.

Today’ s Agenda

Global Anti-Money Laundering Survey 20142

Identifying emerging trends, threats and opportunities3

Benchmarking AML efforts within financial services4

Hot topics in AML5

Background1

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Why is AML important?

► UN estimated amount of money laundered globally in one year is 2 - 5% of global GDP

► Australia’s GDP: AU$1.5 trillion, therefore in the region of AU$50 billion could be laundered in Australia

► World events such as Russia, Ukraine, Syria and Gaza affect Australian banks and increase their ML/TF risks

► Many of the global banks that received large fines, didn’t think they could be involved with money laundering

► The Financial Action Task Force (FTAF) currently undertaking their mutual evaluation of Australia’s AML/CTF regime

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How real is Money Laundering and Terrorism?

Capital punishment for BNP Paribas

THE American guillotine has fallen. After lengthy negotiations, prosecutors and regulators announced on June 30th the penalties they planned to impose on BNP Paribas, France’s largest bank, for evading American sanctions on doing business with Cuba, Iran and the Sudan: an almost $9 billion fine, a guilty plea to criminal charges of conspiracy and falsifying records and a suspension of its right to clear certain dollar transactions.

The Economist 2014

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KPMG conducted a global survey of financial institutions on AML and Sanction related issues in 2014

The survey included an analysis over the last 10 years, taking into account previous KPMG surveys. A summary of those trends appears below:

Priority for senior management

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Cost of compliance

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Cost of compliance

Taking a global approach

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Cost of compliance


Politically exposed persons

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Cost of compliance



Know your customer

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Cost of compliance



Know your customer

Sanctions compliance

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Cost of compliance



Know your customer


Transaction monitoring

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Cost of compliance



Know your customer


Transaction monitoring

Regulatory approach

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Identifying emerging trends, threats and opportunities

► What is coming next?

► Trends – increase in regulatory burden for AML and Sanctions globally, it is not going away. Greater number of international regulators taking an interest in AML means more interpretation to take into account.

► Threats – is major enforcement action enough or does it just punish shareholders but not senior management? Move towards more personal accountability.

► Opportunities – competitive advantage of doing AML well? Not sure but getting it right first time in CDD i.e. avoiding remediation is cheaper.

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Benchmarking AML efforts within financial services

► i.e. What is everyone else doing?

► Complicated area

• Domestic banks with overseas operations

• Global banks with domestic operations

• Superannuation funds with predominantly Australian exposure

• Remitters with global operations but potentially fewer compliance personnel

• Who is doing best in AML at the moment?

• Those that best demonstrate that they have fully adopted a proportionate risk-based approach, and are monitoring their AML/CTF controls closely – a defensible position.

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Hot topics in Australia

► Board and Senior Management ownership and governance

► Inadequacy of internal monitoring and supervision (1st, 2nd and 3rd Line)

► Complex KYC processes in higher volume environments (including the

new ultimate beneficial ownership rules)

► Difficulty with linking the ML/TF risk assessment to controls in the

AML/CTF program (demonstrating effectiveness)

► Keeping ML/TF assessments current

► Maintaining current AML/CTF policies and procedures


Hot topics in Hong Kong

► ML/TF risk assessment – HKMA sent letters to all banks on 18 July 2014

requesting details of ML/TF risk assessments

► Onsite examinations becoming more frequent and extensive, with

thematic reviews across Private Banking, Cash Intensive Businesses,

Tax Evasion, Transaction Monitoring, Customer Due Diligence, Senior

Management Oversight

► Accountability reviews – has flow on effect, can affect CAMEL rating of

bank which measures financial condition and overall soundness of bank


Other hot topics in Asia-Pac

► Scrutiny is intensifying around Politically Exposed Persons (PEPs) and

High Net Worth Individuals

► Ineffectiveness and operation of transaction monitoring systems

► Managing sanctions compliance

► Re-emergence of Trade Finance as a ML/TF risk

► Challenges for global and regional banks to managing compliance with

differing jurisdictional regulations


Hot topics in the U.K.

► Inadequacy of high-risk client acceptance processes and decisions

► Inadequacy of identifying PEPs and monitoring their transactions

► Failure of enhanced customer due diligence processes

► Inadequacy of policies and procedures for managing correspondent

banking relationships

► Lack of due diligence for trade finance, specifically letters of credit


Hot topics in the U.S.

► Managing a changing regulatory landscape. Scope and interpretation of

current U.S. BSA/AML regulations by U.S. regulators

► Inadequacy of AML systems’ monitoring and oversight. How are they

designed and do they work as intended?

► Inadequacy of independent testing for BSA/AML programs

► Maintaining a robust assessment and documentation of a financial

institution’s BSA/AML risks

► Implementation of a risk-based BSA/AML compliance program and

supporting policies and procedures

© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

Liability limited by a scheme approved under Professional Standards Legislation.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

This presentation is not to be distributed without our prior written consent.

Contact details:

David Luijerink PartnerKPMG ForensicE: [email protected]: 0428 033 401

Jeremy AllanAssociate Director KPMG ForensicE: [email protected]: 0434 305 580

mailto:[email protected]

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