After regulator allegations of non-compliance with Anti-Money Laundering regulations, the CEO of Australia’s Westpac Banking Corp. resigned his post last November as complying with anti-money laundering regulations poses a growing threat to financial institutions and their executives. His resignation followed the exits of the CEO and chairman of Swedbank (Sweden’s largest mortgage bank) in 2019 and the departure of Danske Bank’s CEO in 2018 following revelations of €200 billion in suspicious transactions. Given massive challenges many banks face in discerning which of their clients engage in illicit acts, they may be added to the list of this trauma because the financial industry’s exposure to money laundering is vast. An estimated 2 to 5 percent of global gross domestic product is laundered, according to the United Nations. That’s a stunning US$800 billion to $2 trillion. It has now been found out that when a bank’s top management team can effectively answer five questions, the risk of their being unaware of money-laundering activities in their midst can drop considerably.
The first question should be whether the foundation of the anti-money laundering program of the bank is sound and broadly implemented, in this realm, the senior management team must make sure that every employee understands that combating money laundering is his or her job—not a task relegated to the corporate compliance department. The banks must also be able to ascertain the thoroughness, effectiveness and the latest development in their investigative capabilities. The banks should also be able to identify their smartness and assiduous effort being made in identifying money laundering. The approach of banks in dealing with the growing sophistication of criminal money laundering is also imminent as money now moves around the world with greater speed and convenience, and untraceable cryptocurrencies have become a haven for dirty cash. Bank executives need to ensure that their solutions effectively screen the relatively new wave of payment mechanisms such as SEPA (Single Euro Payments Area), Xoom, TransferWise, Zelle, Venmo and the like. They also need to confirm their banks’ adherence to emerging industry standards, notably those on cryptocurrencies from such organizations as the Capital Markets and Technology Association (CMTA). The last of these questions to be answered is in how adequate the money laundering technology is. Bank executives should ask the managers in charge of combating money laundering to periodically (even perhaps quarterly) present a compliance report to the board of directors.
