Anti-Money Laundering Spending Up 71 Percent at North American Banks

With an expectation that the appropriate IT systems are now in place to support monitoring and regulatory reforms, those same North American executives expect to hold spending increases to just 28 percent over the next three years, the KPMG study found. But IT systems are only part of the monitoring process.

"A company's IT spend is not a panacea to its anti-money-laundering issues," said Teresa A. Pesce, a Forensic practice partner overseeing the AML service line for KPMG LLP, the U.S. audit, tax and advisory firm. She applauded banks who also invested in hiring and training their employees.

"A vigilant, experienced and well-trained staff is the first line of defense in the fight against money laundering," Pesce said, noting that 100 percent of the KPMG survey's North American respondents reported that they rely on their employees to report suspicious transactions. The global average for reliance on workers was 97 percent.

In addition, 95 percent of North American banking executives reported a rise in the number of suspicious activity reports (SARs) over the past three years, with 63 percent of those surveyed saying the number of SARs were up "substantially." Globally, 72 percent of those surveyed reported an increase, while just 42 percent saying the number were "substantially" higher. The white paper did not ask for the number of SARs that each institution filed.

With more SARs being filed, banks have new investigative challenges, particularly when an issue requires cross-border deployment of staff and when emerging markets are involved.

"To successfully combat global AML issues you need a truly global team," said Pesce. "That means having well-trained, locally-based investigators in foreign countries who know the domestic banking laws and business culture, as well as how to speak the language."

Pesce also pointed out that although globalization of banking and other market forces have increased the focus on money-laundering by senior management and boards, more attention is needed. According to the survey, only 63 percent of North American respondents believed AML issues were among senior management's highest priorities.

"With regulatory and legislative change, greater engagement with countries with high associated risks, and expanded enforcement requirements, AML needs to move higher on the agenda for both the senior management and the board," she said.

"Many AML executives may have a view that they have invested so heavily in IT systems and hiring experienced professionals that they do not need to focus on tactical and relevant strategic compliance and monitoring issues," said Pesce. She cautioned, however, that AML remains a very critical issue, particularly since 7 percent of North American bank executives reported their institutions were not in compliance with U.S. Patriot Act testing requirements.