have been reactive in dealing with such cases, usually with understaffed teams, they will have to do better to get ahead of the cases and follow a “If you could have known, then you should have known” approach.
The report highlights siloed risk management approaches across banking operations, customer due diligence, sanctions screening, and trade-based transactions as the root cause for systemic inefficiencies leading to fraud.
According to the survey, meeting increased regulatory expectations and enforcing anti-money laundering (AML) compliance pose key operational challenges to banks, even as 81 per cent respondents across India, Sri Lanka and Bangladesh indicated that their AML programme was compliant with all regulatory requirements. These challenges range from reliance on manual processes, inadequate data, and the inability to recruit or retain skilled staff.
“Historically, AML programmes have been incident-driven with lean teams to manage response to events, or changes in regulatory developments. But that is no longer adequate today. With increased regulatory scrutiny, banks
need to move to a proactive approach to demonstrate their compliance to avoid fines, rather than rely on the traditional reactive approach,” said KV Karthik, Partner, Forensic, Financial Advisory, at Deloitte
As per the survey, the respondents highlighted technology-related challenges such as high false positives, data accuracy and unstructured data, limited integration with core banking systems, and incomplete coverage of all products and processes. This lack of technological maturity, and data governance appears to have had a cascading impact on every aspect of the AML programme.
In the area of sanctions screening, nearly 60 per cent respondents indicated that they are struggling with false positives. An ever growing and complicated sanctions list management has emerged as another major issue amongst the respondents.
In the area of trade-based money laundering, 86 per cent respondents indicated screening trade finance
transactions against internal lists, regulatory lists, and sanctions lists. The respondents also pointed at challenges such as identifying hidden relationships between trade partners and ports, estimating pricing and invoicing of goods, and unavailability of a single automated system that can combine all screening data.
“Regulators today expect banks to have a consolidated view of customer transactions across businesses and jurisdictions, to identify any unusual transactions and behaviours, or potential sanctions violations. The current technology frameworks may pose a challenge to doing that and banks need to take a strategic and longer term view of technology investments,” said Karthik.