As Money Laundering Surges, Banks Seek AML Experts
The global battle against money laundering is costing banks about 60% more than it did three years ago. That’s according to a recent survey by KPMG LLP. Banks also predict the price to monitor and stop money laundering is going to increase substantially. Meanwhile, the pick up in cross-border deals is only complicating matters. Banks are now staffing up to better monitor transactions and spot suspicious activity. Mitch Feldman, President of executive recruiting firm, A.E. Feldman, says anti-money laundering experts are in high demand and that trend is going to continue.
Money laundering involves hiding the source or destination of illegal funds using financial transactions. Essentially, banks are used to hide money derived from tax evasion and other criminal activity. The act of money laundering effectively eliminates any audit trail, making it appear as though funds have come through legitimate sources.
Banks are required by law to take steps to prevent money laundering. The Bank Secrecy Act passed in 1970 required banks to report cash transactions over $10,000 via the Currency Transaction Report (CTR). By 1986, the act of money laundering was criminalized under the Money Laundering Control Act. Fifteen years later in 2001, the U.S. passed the Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act, more commonly known as the PATRIOT Act. This piece of legislation requires financial institutions to share information with the government and each other in order to identify and report any activities that may involve money laundering or terrorist activity. The law also calls for the verification of customer identity, enhanced due diligence and the establishment of anti-money laundering programs across the financial services industry.
But complying with anti-money laundering laws has been much more expensive than banks anticipated. Globally, the cost of fighting money laundering has risen 58% since 2004, according to KPMG. The study, which looked at 224 banks in 55 countries, estimates that money-laundering flows are in excess of $1 trillion each year. In North America alone, spending to combat money laundering has increased by a whopping 71%. Not far behind, the Middle East and Africa saw a rise of 70%. Compliance costs also rose 58% in Europe and 37% in Asia.
Meanwhile, an increase in cross-border mergers has added to the regulatory obstacles, making it increasingly difficult to maintain and link technology that monitors customer transactions. Nearly 50% of the banks surveyed by KPMG say they are unable to track a customer’s account from one country to another - even within their own organization. Things are only going to get worse. In a recent study, PricewaterhouseCoopers reported that cross-border transactions are expected to pick up this year with heightened activity across U.S., European and Asian markets.
An alarming 95% of North American banking executives surveyed by KPMG disclosed that the number of suspicious activity reports has risen. More troubling, most of them say it has gotten substantially worse. Banks now predict that costs to fight money laundering will increase 34% more over the next three years. The biggest expense: implementing computer systems and hiring experienced personnel to monitor transactions.
A.E. Feldman says this trend resulted in a surge of AML jobs. Banks are staffing up in an attempt to better monitor transactions and identify suspicious activity. Successful candidates must have demonstrated success in business and strategic planning as well as a strong background in finance or accounting. Strong leadership and communication skills along with the ability to manage client relationships are also key requirements.
