Rising corruption cases, terrorism and heavy fines paid by global financial institutions have forced the financial services industry in India to increase their focus on money laundering, says the India Anti-money Laundering (AML) Survey 2012, released by KPMG.
Globally, it is estimated that the amount of money laundered in one year is two-five per cent of the global gross domestic product (GDP) or $800 billion. The survey was conducted across the financial services sector, covering public and private sector banks, general and life insurance companies, mutual funds, non-banking financial companies and other institutions in the sector covered under the Prevention of Money-Laundering Act.
According to the survey, 86 per cent of respondents noted their senior management took an active interest in AML-related issues and discussions. Although an increasing number said (65 per cent) they conducted periodic risk assessments (either half-yearly or yearly) to evaluate their money-laundering risks, a significant number (32 per cent) said they undertook this based on a change in product, procedure or regulatory change.
The survey also showed, 77 per cent said they had specific procedures in place for identifying politically-exposed persons (PEP). PEPs were also viewed as having the highest risk in relation to account opening.
Among the areas that had most regulatory scrutiny, Know Your Customer (KYC) policy and processes was recognised (90 per cent) as having the most regulatory scrutiny.
The survey revealed that 72 per cent had specific procedures in place for updating the principal information on an ongoing basis, which comprises collecting customer data to fill any gaps that might exist in the KYC process. Other respondents, who did not have a pro-active strategy, cited various reasons such as system limitations, cost and lack of legal mandates.
More From This Section
Not only was the risk of money laundering being taken more seriously, an overwhelming 82 per cent of the survey respondents indicated the cost of AML compliance would increase over the next two to three years.
This rise would be used in areas, such as implementing/upgrading transaction monitoring systems, implementing global policies and remediating/refresh exercise.