As technology continues to advance at a rapid pace, financial institutions all across the world are under intense pressure to improve efficiency, reduce costs and boost productivity. Indeed, there is now a considerable global need for the financial-services industry to evolve comprehensively from traditional, age-old business models.
It’s not easy to be stuck in the middle, a position that banks inhabit as they process the financial activities of others. Most transactions passing through their systems are honest, but some are illicit, often involving money laundering. Are banks innocent victims of criminals who exploit their processes or knowing participants in crimes? The case has not been tried, but public sentiment leans toward the latter. Can banks come clean?
Money laundering is an unfortunate reality for banks with the potential to not only put them in hot water with regulators but destroy their reputations as sound, above-board financial institutions. Data and technology are essential to unmask those villainous customers who use their financial firms’ systems for illicit gain. What are the key areas that bank managers must consider when developing strategies to combat this insidious threat to their businesses?
The risks to banks and their executives from non-compliance with anti-money-laundering regulations are increasing dramatically. The United Nations estimates that as much as $2 trillion (5 percent) of global GDP is laundered. Since 2018, the exits of CEOs from Westpac, Swedbank and Danske Bank underscore the consequences. To effectively manage money-laundering risks, bank executives need to have sound answers from their compliance, security and IT professionals to five core questions.
The Great Recession forced big international banks to re-evaluate risks and “de-risk” some overseas operations, guided by an augmented focus on AML and CFT compliance. Unfortunately for Caribbean banks, de-risking for the North American majors translated into trimming ties with them. Changing the perception that they are “risky” has not been easy for Caribbean bankers, but through resolute, concerted effort, the risk profile of the Caribbean banking industry is improving.
Digital currencies are proliferating around the globe, with even the bigtech players such as Facebook jumping in. What about central banks issuing their own central bank digital currencies? Many central banks are weighing the advantages and disadvantages of CBDCs so as to minimize disruption. More recently, six central banks announced that they will work jointly on this issue with support from the BIS, which shows the increasing focus on cross-border implications.
Modern Slavery is one of the fastest growing criminal activities in the world, creating an estimated 40 million victims globally. Modern Slavery networks generate significant sums of money, including from work done by the victims. These funds represent the proceeds of crime, with approximately $150 billion in illicit proceeds being generated every year.
It is hard to believe that we just wrapped up another year. The beginning of a new year is one of the best times to both reflect on the previous years successes, while looking ahead at what the biggest challenges, priorities and opportunities will be for companies as they enter the new year.
The European Union has put up a brave front against financial crimes such as money laundering, but the criminals still manage to get away with a way too much ill-gotten gain. Progress is being made with the new AMLD5 framework, but much more needs to be done to achieve resounding success. What are some of the steps the EU should take to finally grab this brazen bull by its horns?
Organisations across the world increasingly expect global access to finance in real-time. They also expect finance to be consistently available in a way that works for them in any country and currency, without the process being held up by the historical constraints of national boundaries.