Asian Banks Must Raise AML, Anti-Fraud Game - Study

Tom Burroughes

6 March 2020

A small share (18 per cent) of Asia-Pacific banks have planned to meld fraud and anti-money laundering compliance functions together, even though the majority (71 per cent) of them know that this will help defeat crime, according to a survey.

Software analytics business estimated that the cost of cybersecurity to the global economy would be $5.2 trillion over the next five years.

FICO’s study said that Asian banks’ planning efforts are “significantly behind” those of their Western peers. In an earlier survey commissioned by FICO in 2019, 24 per cent of US banks and 47 per cent of UK banks had strategic plans to fully integrate functions. FICO estimates that 80 per cent of the functionality to carry out fraud checks and AML checks on a new account opening is the same.

Most Asia-Pacific banks (38 per cent) are instead looking at a more tactical approach, actively sharing resources where synergies exist. Examples of this being the sharing of data, controls or staff. Just 12 per cent of banks in both the US and UK said they were pursuing this approach.

"What we are seeing in Asia Pacific is most likely the fast-follower mentality coming through," Timothy Choon, FICO's compliance lead in Asia-Pacific, said. "Many banks in the region are closely watching those who are making the change overseas to see what lessons they can learn from first-movers before embarking on a similar programme of change."

When asked about current levels of integration, most banks in Asia Pacific admitted that they currently had siloed operations. In terms of which areas operated separately or had low levels of collaboration, 95 per cent nominated controls, 94 per cent detection systems and 91 per cent investigative systems. In contrast, 82 per cent of banks in the UK reported either full integration or a high level of collaboration for detection systems, and 76 per cent for controls.

"Overseas banks have moved to convergence sooner in response to new criminal threats and punishing fines," said Choon. "The same is happening in Asia-Pacific but the pace has been slower due to different regulation, lower losses and a more fragmented market. The historical legacy of separate departments and leadership is also a factor, as there has been more change at the top overseas, which hastens the integration process."

Only 8 per cent of APAC banks have fraud and AML compliance functions being reported to the same business executive. This remains very low compared with the US where about a quarter of banks have just the one leader or European banks where 37 per cent have integrated the functions under one manager.