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Anti-money laundering falls on boards’ agenda

Trade Arabia.- Altaf Dossa, head of forensic services at KPMG Al Fozan & Al Sadhan, said: “The issue of sanctions, and its application, has been playing a more prominent role, with investment being channeled toward customer and payment screening solutions. However, such solutions require the requisite resources to address potential matches generated by these solutions, and skilled resources are few.” The profile of AML within the Middle East and Africa region has risen over the last three years, with 79 percent of respondents claiming their board of directors takes an active interest in AML, up from 54 percent in 2007. This is reflected in the fact that 64 percent said their board of directors met at least quarterly to discuss AML issues, compared to 48 percent in 2007. A further 24 percent of respondents stated that AML was discussed at least on a monthly basis by their board of directors.

Despite this rising expenditure, only 10 percent of respondents had off-shored or outsourced parts of their AML functions, with 80 percent having never considered this as an option. Banks may be missing opportunities to save money on some of the lower risk aspects of their AML program. The survey also included ‘anti-bribery and corruption activities’ for the first time and this was immediately ranked the third largest area of expenditure, indicating that the extra-territorial reach of, and heightened regulatory expectation associated with, the new UK Bribery Act and the US Foreign Corrupt Practices Act is having an impact. Recent events in the Middle East and North Africa have intensified the focus on politically exposed persons (PEPs). Since our 2007 survey, the number of respondents with formal processes to identify and monitor PEPs has increased from 71 percent to 88 percent. The Third EU Money Laundering Directive, which was implemented in 2007 and required banks to monitor PEPs, has had a clear impact, with the number of European institutions with such procedures rising from 65 percent in 2007 to 94 percent in 2011.

“As the Arab Spring of 2011 is prolonged into summer and beyond, it is interesting to see that financial institutions across the globe have had the foresight to up their game by adopting a risk-based approach to knowing your customers, as the majority (96 percent) now use PEP status as a risk factor,” Dossa said. “The challenge for banks is that, in some cases, PEPs have become sanctioned parties or persona non grata overnight and global authorities have scrutinized past transactions with PEPs with whom they had previously encouraged business. Banks need to ensure that they can justify their relationships with PEPs, particularly with an eye to future changes in their political standing. They should always be asking where the PEP obtains the funds that are passing through the institution, and be ready to explain the purpose of transactions that they undertake,” he added.


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