Financial fraud is a growing problem around the world and more money is being pumped into anti-money laundering measures than ever before. According to the latest projections from Business Market Insights, in APAC alone, it will reach US$1.7bn by 2027, up from just US$377mn in 2019. Duncan Taylor explores how money laundering is being tackled in the Asia Pacific region.
Money laundering: a definition
Banks and companies in the financial services and insurance sectors are engaged in a constant battle against money laundering.
Money laundering is described by Interpol as “any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources”. These illegal funds are obtained from activities such as terrorism, counterfeiting, smuggling, prostitution, drug trafficking and illegal arms sales. The methods used to launder this ‘dirty’ cash are increasingly sophisticated and varied.
Examples include purchasing life insurance policies, smuggling cash into offshore accounts, using shell companies, buying real estate and filtering money through cash-intensive businesses.
Anti-Money Laundering in Asia Pacific
The global money laundering and terrorist financing watchdog, the Financial Action Task Force, holds its 200 member countries and jurisdictions to account while individual governments and regulators focus on adopting their standards.
Of course, Asia Pacific is a huge region, and the countries within it have wildly differing regulations on AML. Hong Kong, China, Malaysia and Singapore are members of FATF, Thailand, Cambodia and Vietnam are not.
Compliance with FATF recommendations requires sophisticated solutions to spot suspicious behaviour. Artificial Intelligence is already starting to play a huge part in AML. Algorithms can be set up to detect fraud by monitoring spending habits and transactions, analysing customer behaviour and learning criminal patterns.
In countries that take AML seriously, a failure to comply with regulations can result in punitive fines for companies in the financial sector.
Examples of recent fines include:
- Westpac, Australia’s second-biggest bank was fined AUS$1.3bn by regulator AUSTRAC in 2020 for breaching the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Westpac admitted over 23 million individual breaches!
- In 2021 the Hong Kong Monetary Authority (HKMA) issued fines to four banks worth a total of US$5.7mn for failing to uphold compliance procedures and breaching AML regulations.
- In China, fines for AML non-compliance tripled in 2020 and at the beginning of this year, China’s central bank tightened up its AML rules.
The threat of fines has acted as a catalyst for banks and financial institutions across the region to clean up their act and improve their AML procedures. Which is a good thing for all of us as financial crime has serious social costs and far-reaching implications, threatening the safety and soundness of financial systems and even nations.
AML at Infinity
As Infinity’s dedicated compliance officer, I am tasked with ensuring that our internal procedures are fundamentally sound. I ensure that our due diligence and business monitoring are compliant with the most stringent regulator of all the countries that we operate in (Labuan in Malaysia). I thoroughly vet all new providers and funds but also manage effective risk policies and procedures that interlock with compliance values to identify and mitigate compliance problems as early as possible.
How does this affect you, Infinity’s clients? Well, for all new clients we carry out strict Know Your Customer (KYC) due diligence to verify your identity. We try and keep form-filling to a minimum, but we are obliged to put in place internal controls and processes to gather information at the start of the relationship to fulfil guidelines set by regulatory bodies. Of course our monitoring doesn’t finish there, and on occasions we or our providers may request updated documentation, so please be patient with us – it is in all of our interests to reduce the opportunities for money laundering.
I have over 20 years of experience in the financial services industry and hold a Chartered FCSI qualification. I ensure that our operations are fully compliant with the rules of our most stringent regulators.