Money Laundering Report Cites Successes, Extra Work

July 9, 2002

A new report on money laundering prepared by Professor Martin Gill of the University of Leicester’s Scarman Centre, concludes that the senior mangers of most financial firms, including insurance companies, now receive some kind of training in how to spot and control money laundering, but there were compalaints about the extra work involved, and a further finding that more research on the problem is needed.

“The financial sector is in the spotlight post September 11th,” Gill stated. “We now know that they are struggling to cope with regulation. Not only is it seen as burdensome, in some cases regulatory requirements get in the way of tackling money laundering. While some of the findings from the survey are being addressed, money laundering and money launderers are part of a fast moving scene where little stands still for long. Research is important and we hope the financial sector will find these findings helpful and heed the warning that they contain.”

Ironically the study revealed that, “While over 90 percent of respondents believed that the regulation regime was effective, there was concern at the amount of work needed to comply, and 15.1 percent of respondents felt that the emphasis on achieving compliance could detract attention from the main aim of preventing money laundering.

One major item, frequently debated, are regulations designed to implement “know your customers (KYC)” procedures, which are a central plank in anti- money laundering efforts. “Over a third of respondents believed that regulators placed too much emphasis on KYC,” said the report. In addition “58.2 percent of respondents believed that KYC procedures could lead to clients being alienated, and 46.3 percent believed KYC procedures could result in lost business.”

Two thirds of the respondents “believed that the KYC requirements do not adequately cover checks required on the associates of public servants or ‘politically exposed persons.'”

Suggestions included greater use and availability of advanced databases to facilitate the task of identifying potential risks, and steps to make the general public more aware of the legal requirement banks and insurers are required to take in assessing those risks in order to avoid alienating their clients.

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