ABA Position Paper on Imperatives to Strengthening AML/CFT in Asia

Imperatives to Strengthening AML/CFT in Asia


The presentation on ‘Imperatives to Strengthening AML/CFT in Asia’ by Fintelekt will include a summary of specific AML/CFT risks and vulnerabilities for those countries in Asia where Fintelekt has conducted in-depth research studies. It will highlight the key elements of an effective AML/CFT framework with a focus on improvement areas for banks, highlighting some major gaps, and providing strategic recommendations to the policy advocacy committee to further communicate this to the banking industry in each country.

As regulators and governments tighten AML compliance and change laws to ensure that each country progresses well integrally as well as in the eyes of the global compliance community, personal liability for bankers has become a very real threat. While some countries were forced to move quickly to adapt to new compliance regimes, others got the benefit of more time; which arguably is now running out.

04 IMG_0222Whether it was FATCA in the recent past, or the GDPR regulations now which has prompted a complete overhaul of the way banks approach their customer data, regulations will continue to evolve and impact those banks that have ambitions to maintain or increase their global or regional footprint.

Basic technology infrastructure, cyber security, and enterprise wide transaction monitoring systems have progressed over the years, and what is really gaining ground today are concepts such as RegTech and Fintechs which have disrupted the entire banking system in many countries, especially in the area of Payments. This has added new risk factors because the faster money moves between people and institutions, the harder it is becoming to spot suspicious transactions in real time.

Fintelekt research surveys across Asian countries have highlighted some fundamental risks that banks are still struggling to grapple with, including identification of source of funds, trade based money laundering, and lack of knowledge on beneficial ownership. They face challenges especially in the areas of balancing business and compliance aspirations, ongoing customer due diligence, staying updated with regulatory developments and KYC remediation. While a significant amount of time and effort is going into managing these challenges which are really in the ‘business as usual’ category, banks need to quickly and sustainably speed up their efforts in managing new AML/CFT risks and stay ahead of fraudsters.

Building a culture of compliance, a concept that has to be actively promoted by the board and top management in line with the bank’s risk appetite is imperative, is often overlooked due to

lack of understanding and appreciation of the reputational and financial risks posed by money laundering. This has a deep impact on budgets allocated for compliance. Risk identification and assessment, which has customer data and profiling as the foundation is, at times, compromised in certain categories of banks during account opening and ongoing monitoring, due to which effective risk identification is difficult. This is further compounded when risk identification and monitoring is done partly manually, without the right technology in place.

With risks as diverse as trade based money laundering, remittances, narcotics, smuggling, terrorist financing techniques, human trafficking, virtual currencies, dual use goods and proliferation financing, it is critical for banks to understand at an operational level how these elements translate into actual typologies and customer behaviour so that the appropriate red flag indicators can be built into its risk identification and monitoring systems and processes.

Fintelekt believes that there are certain strategic measures that have worked well to increase the maturity level of AML/CFT compliance at an industry level in certain countries, thereby contributing to lowering the national risk, such as inter-regulatory dialogue, building regulatory sandboxes, capacity building across levels within the banking industry, fostering dialogue through formation of country compliance associations, and FIU automation and agility, amongst other, which it would encourage the ABA to promote to its member countries in the interest of further developing a strong compliance regime in the region.

The Presentation file can be downloaded HERE.


Prepared by:


Shirish Pathak
Managing Director
Fintelekt Advisory Services Pvt Ltd