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2021 Press Releases

February 16, 2021

APAC Financial Institutions Are Most Susceptible to Violating Anti-Money Laundering Laws - ComplyAdvantage Report

ComplyAdvantage, a global data technology company transforming financial crime detection, unveiled findings from its report The State Of Financial Crime 2021, which found that the Asia-Pacific (APAC) is the world's most wayward region in reporting financial crimes.

Conducted in Q4 2020 across North America, Europe and APAC, a survey of 600 C-suite and senior compliance decision-makers revealed that as much as 87% of APAC respondents said they consciously choose to violate laws and incur anti-money laundering (AML) fines "all the time", "regularly" or "occasionally". The global average was 80%, and the figures in North America and Europe were 79% and 76%, respectively.

Among the three APAC markets surveyed, Singapore-based respondents were the most law-abiding (only 72% said they will violate laws and incur fines), followed by Hong Kong (90%) and Australia (95%).

The survey respondents came from enterprise banking, investments, crypto, insurance and fintech organisations.

Such an attitude among banking leaders and compliance professionals undermines global and APAC governments' efforts to fight financial crime, which has been on the upswing since the onset of Covid-19. Due to the vast amounts of public funds flowing through the international financial system, and the heightened use of digital payments as businesses and purchases shift online, crime rates have increased.

"As a result of Covid-19, financial institutions today handle a much higher volume of digital payments, many of which need to be processed near instantly. Few of them have the processes and technologies in place to be able to carry out due diligence checks and where necessary, block the transactions, in milli-seconds," said Jaede Tan, Managing Director of ComplyAdvantage Asia Pacific. "In the interest of maintaining profit, financial institutions often let unknown or even questionable transactions go through. This exposes them to punitive action from the authorities and, of course, reputational damage."

Other insights from the report include:

  • Suspicious activity report (SAR) filing was on the rise with 76% of APAC respondents saying they filed more SARs in 2020 than the previous year. This could be due to the higher number of Covid-related crimes that exploit accelerated digitalisation.

  • 94% of APAC respondents stated that real-time AML risk data would improve their compliance operations. This is because banking transactions that take even minutes to clear would degrade customer service in today's environment.

  • Fraud is a significant contributor to financial crime in 2020, with 68% of APAC respondents ranking improving fraud detection as their highest priority. Tackling fraud is important because it directly addresses criminal activity and protects institutions from immediate and significant financial losses.

  • Cybersecurity and third-party risk management were noted as financial institutions' biggest compliance-related pain points in 2020. With 55% of APAC respondents ranking cybersecurity as a top pain point.

  • 65% of APAC respondents plan on upgrading their legacy systems in 2021.

  • 59% of APAC respondents plan on replacing or upgrading their transaction monitoring system in 2021.

The above findings highlight the need for high-quality AML data amid higher risk appetites, and the urgency for financial institutions to be nimble and granular in their approach to combating fast-evolving financial crimes.
Going forward, financial institutions should ensure that they:

  • Constantly monitor global regulations to identify changes, and understand the different types of criminal activity that are prevalent in the jurisdictions in which they operate.

  • Put in place processes and technologies to ensure that enterprise-wide risk assessments capture new threats and risks created by Covid-19. As new technologies are onboarded and new payment methods and channels are introduced, firms should document associated AML and counter financing of terrorism (CFT) risks; and how they are managing them to ensure that they do not expose their firms and customers to enhanced financial crime threats.

  • Have robust, flexible and integrated screening and monitoring systems to navigate the complexities of different financial crimes.

CompyAdvantage's State Of Financial Crime 2021 report outlines the most important financial crime trends that Compliance Officers are most concerned about within the coming year. Specifically, these trends include increased fraud related to COVID-19 relief; risk vulnerabilities related to inconsistencies in global AML and CFT systems; the growth in sophistication of computer and mobile-enabled cybercrimes via payment systems; and the continued use of sanctions as a tool of first resort.

Designed as a strategic guide for global compliance teams, the report lays out the many emerging threats that governments and financial institutions will face in 2021, along with prescriptive recommendations for implementing best compliance practices for combating financial crimes.