It would be difficult to write about money laundering controls in Asia without mentioning 1MDB, a Malaysian sovereign wealth fund embroiled in an ongoing international money laundering scandal. Yet, when Risk.net contacted six of the banks penalised for the wrong-doing to talk about lessons learned, our enquiries were greeted with either radio silence or a flat ‘no’.
One reason for this reticence could be a reluctance to show their hand to money launderers. But another is likely to be a fear of publicising anti-money laundering (AML) breaches – a sometimes bigger worry than the risk of regulatory fines.
Banks in Asia-Pacific are having to work harder to avoid such fallout, as the region’s regulators adopt increasingly rigorous standards and conduct more aggressive investigations. “We’re seeing more of an enforcement approach coming to the major financial centres in Asia,” says David Howes, Singapore-based deputy head of financial crime compliance at Standard Chartered, one of the banks unwilling to talk about their 1MDB experience.
According to a Thomson Reuters survey released in October, financial companies put their average customer due diligence costs in Australia, Hong Kong and Singapore at $50 million a year – a touch above the global average spend on this central part of AML controls. The average cost for the three countries has changed little since last year’s survey, whereas the global figure fell to $48 million from $60 million.
Local regulators’ actions are partly driven by the Financial Action Task Force, an intergovernmental body whose 37 members represent most major financial centres around the world. In 2012, FATF set out landmark standards for national measures against money laundering and the financing of terrorism and weapons of mass destruction, billing them as a “stepping up” of the fight against those crimes. Since then, it has updated the recommendations every year apart from 2014. FATF also regularly visits its member states to gauge their implementation of the international standards and lays out the findings in detailed public reports.
FATF inspections in Malaysia in late 2014 and Singapore in late 2015 prompted “significant amendments” to AML regulation in the two countries, says Stephanie Magnus, head of the financial services and regulatory practice in Singapore at law firm Baker McKenzie.
Singapore, for example, issued revised AML regulations for financial institutions in April 2015. Key changes included requiring company-wide assessments of money laundering risks, in addition to evaluations of individual customers; introducing a new customer category for people entrusted with prominent public functions in an international organisation and corresponding stricter rules for business relationships with such people; and additional requirements for cross-border wire transfers exceeding S$1,500 ($1,112).
Since the FATF inspections, regulators in both countries have also been more proactive in enforcing the rules, adds Magnus.