High Growth Markets magazine – Unleashing Africa’s potential

Results of the 2012 Africa Anti-Money Laundering Survey

The level of interest by African banks in anti-money laundering (AML) has risen drastically, according to the 2012 KPMG Africa Anti-Money Laundering Survey. The survey revealed that 66% of the main board of directors have prioritised AML issues, as banks work to comply with stricter global regulations.

The estimated amount of money laundered globally in one year equates between 2–5% of global GDP, or US $800 billion to $2 trillion. More than 10 years after 9/11, regulators have become stricter on the banking industry. This has resulted in the cost of running Anti-Money Laundering (AML) programmes continuously rising.

The increasing cost of compliance

Banks are looking at ways to ensure greater efficiencies in order to curtail the increasing cost of compliance. Against this backdrop, KPMG conducted an AML survey in 11 African countries: South Africa, Angola, Botswana, Mauritius, Zambia, Kenya, Tanzania, Uganda, Rwanda, Ghana and Nigeria.

The survey covered the following topics:

  • The role of senior management in AML
  • The cost of AML compliance
  • Policies and procedures
  • Know Your Customer
  • Politically Exposed Persons (PEPs)
  • Transaction Monitoring
  • Sanctions
  • Training.

The banking industry’s role

Ensuring banking systems cannot be used for money laundering and terrorist financing purposes is a key imperative for policymakers and lawmakers across the globe. Achieving this goal won’t be possible without the active assistance of the banking industry, and it can only work if the banks play their full part.

Encouragingly, KPMG’s Africa AML Survey 2012 shows that the vast majority of respondents believe that the current AML burden is acceptable, and they want to work with regulators and law enforcement to make the system work more effectively. It’s also apparent, however, that this burden has increased over the past number of years, and is set to increase even more.

The following results were revealed

  • AML is a high priority within banks
  • The cost of compliance has increased over the past number of years
  • Respondents follow a risk-based approach to compliance
  • Politically Exposed Persons (PEPs) are an area of focus
  • Sanctions compliance remains a challenge
  • Upgrading the existing transaction monitoring systems is where the most crucial spend will occur in the next three years
  • Face-to-face training is the most common method of training
  • Investment in AML will increase over the next three years.

Active interest in anti-money laundering issues

The survey revealed that AML has developed significantly over the past 20 years, and recent regulatory scrutiny has seen unprecedented fines being handed down. As a result, AML has become a key issue for senior management, both locally and internationally.

Due to challenges of managing the regulatory requirements of a number of jurisdictions, 95% of respondents indicated they had benchmarked their AML policies and procedures based on local regulations and global best practices. Banks within the African region indicated that their biggest spend over the past two years was in Know Your Customer (KYC) policy and process,  enhanced transaction monitoring/reporting (63%) and training (49%).

This is consistent with the industry today. The regulatory environment continues to develop and compliance becomes a moving target that will require banks to constantly re-visit, review and re-invest in their business processes and technology to improve efficiencies and curtail some of the increasing cost of compliance.

Heightened focus on Politically Exposed Persons in Africa

In Africa, 90% of respondents indicated that they have specific procedures for identifying Politically Exposed Persons. Effective PEP management is important to defend against any allegations of doing business with possible corrupt politicians.

There’s still so much that needs to be done in the field of PEP identification and management, especially on the African continent. Banks need to clearly formulate their policy relating to PEPs, agree their approach at a senior level, and then implement the policy through robust procedures, using a range of methods to identify higher-risk PEP clients.

AML continues to evolve and the challenge now is to ensure that the systems and controls put in place are effective in achieving the objective of reducing the amount of corruption or misuse of the banking systems for personal benefits.

Download the 2012 Africa Anti-Money Laundering SurveyClick here for more information on the survey.

David Okwara

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