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Asian Banks push for greater Fintech to cut down AML Compliance cost

  • Richard Marley
  • July 05, 2018
  • 4 minutes read
  • 4966
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Asian Banks are now asking their regional and national regulators to allow more fintech in order for them to cut down AML compliance costs. Recent months have seen regulators and financial watchdogs – especially in Far East and Southeast Asia – slapping huge fines and tightening overall AML guidelines. Both these measures have an impact of double edged sword for the revenues of Asian banks that simultaneously dwindled in the light of multi million dollar fines and compliance costs. This is the reason why banks are looking to employ cheaper yet effective fintech to perform AML compliance in place of large swaths of compliance staff.

 AML Compliance Costs

Asian Banks have millions of accounts, tens of thousands of bank branches and billions worth of american dollars being transferred on daily basis. This huge scale of operations demand an equally huge workforce to ensure compliance regarding AML guidelines issued by financial watchdogs and regulators. On average, in 2017 there were 307 employees tasked to make operations of a financial institution compliant with AML guidelines applicable in this region. This is more than 4 times the number of employees that were working on average in a financial institution to perform AML Compliance in 2016.

HSBC, one of the major Asian banks having strong presence in the region, spent in excess of USD 3 Billion, just in 2017 for AML compliance and tripled its human resource in the span of 4 years. It has now 8600 employees on its payroll only performing compliance based operations.

What Fintech can do for AML Compliance?

Right now, fintech is the only logical and workable solution for Asian banks to cut down cost on compliance measures without seriously affecting their crusade against money laundering activities. Despite a large number of AML Compliance staff, financial criminals have been able to find out ways to circumvent AML Compliance measures of these banks, leading financial regulators to fine huge monetary penalties over these banks.

In a recent case, Commonwealth Bank of Australia was fined hundreds of millions of dollars by Austrac when it was find out that thousands of accounts were not being monitored under AML compliance guidelines of financial watchdog. Fintech can defeat both known and unknown money launderers and can detect suspicious transactions  in far less time as compared to a human staff of compliance officers. Automated systems developed by Fintech can run background checks in a few minutes to check the past transaction history. In case of an usual amount of online funds transfers, a 24 hour vigilant AML Compliance solution can redflag the account for the banking staff. 

Why regulators are reluctant about Fintech?

Well there is no stated or on-the-record resistance shown by regulators for introduction of fintech in order to provide AML Compliance. Infact, financial watchdogs have been encouraging about the use of fintech in banking sector and financial institutions. But they always require banks to utilise technology and manuals that are pre-approved by the regulators for use in banks and financial institutions. This creates a bottleneck to gain approvals for fintech given the limited technological expertise of financial regulators and even smaller number of individuals tasked with approval of fintech. Bureaucratic behaviours and red-tape slows the process of approval of fintech, thus forcing banks and financial institutions to employ higher number of workers and spending millions of dollars while fintech software spend months and months in approval grind mill.

Best Solution

When it comes to fintech for AML Compliance, there is hardly any match of the Artificial Intelligence backed Shufti Pro. It is an end-to-end ID verification SaaS product that provides a comprehensive suite of verification services and one of them is AML Compliance. Shufti Pro has gathered a large databank to perform background checks for AML Compliance. This huge dataset contains information from 1000 Watch lists, Sanction lists and Politically Exposed Persons list. In addition to that, individuals and enterprises present on 3000 databases of international watchdogs are also part on this databank.

Shufti Pro makes sure that every new customer of a bank or financial institution is checked against this vast databank to ensure that no person red flagged in any part of the world for his/her involvement in financial crime, becomes part of bankroll or account list.