Banks world-wide have increased their spending to combat money laundering by an estimated 61 per cent over the past three years, according to a report by KPMG.
Recent estimates suggest that drug dealers, arms traffickers and other criminals launder up to $1 trillion every year globally.
In the wake of September 11, governments have orchestrated a series of co-ordinated national and international efforts to improve anti-money laundering (AML) controls in financial services organisations.
In the UK, several banks have been fined over the past year as the Financial Services Authority (FSA) gets tougher on those firms that fail to comply with the new rules.
Most recently, the Bank of Ireland was fined by the FSA over a series of high value and potentially risky cash transactions that it failed to monitor.
The KPMG report says enhanced transaction monitoring is the main area of increased AML spending over the past three years and will remain so in the immediate future.
The challenge for banks lies in building appropriate systems that enables them to take the required risk-based approach for compliance.
The second biggest focus for banks’ AML spending is on staff training.
As with transaction monitoring, IT plays a leading role again, with two-thirds of respondents using computer-based training to get employees up to speed, even though most believe that face-to-face training is the most effective method of preparing people.
But as systems are put in place, the number of suspicious activity reports (SARs) generated are increasing rapidly, proving the efficacy of the systems but presenting a growing challenge to the FSA to keep up.
A recent report from financial website Finextra showed that AML is the number one challenge facing banks, with three-quarters of respondents say they are currently working on.