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AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
April 2015
Risk Solutions
Financial Services
Roles
14%
Organization Size
23%
24%
Countries
30%
22%
20%
17%
17%
21%
VP and Above
Director / Sr Manager
Manager
Specialist
Consultant / Other
12%
$500M+
$250M-$499M
$100M-$249M
$5M-$99M
<$5M or Don’t Know
Industries
• Investment banking
• Retail banking
• Private banking / wealth management
• Money service, transfer, and FX
• Insurance
• Brokerage
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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Roles
Organization Size
Department
9%
22%
24%
13%
9%
36%
5%
3%
8%
13%
76%
54%
Senior Executive
Manager / Supervisor
Specialist
28%
$500B+
$101B-$500B
$51B-$100B
$11B-$50B
$1B-$10B
<$1B
Compliance
Operations
Line of Business
Other
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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Table of Contents
Situation: .............................................................................................................. 5
Pressures are mounting
Complication: ..................................................................................................... 5
Issues with KYC data, systems, and processes
Solution: ............................................................................................................... 6
Financial institutions are investing to address KYC challenges,
as Board awareness of risks increases
Ensuring Success: ............................................................................................. 7
KYC Best Practices
Appendix: ............................................................................................................. 8
Supporting data from APAC AML and Tax Compliance
Trends (AATCT) research study
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
5
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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KYC Best Practices
Data Management
• Gather as much customer information as possible during the customer on-boarding process. It’s much easier to
capture the information upfront, rather than go back to the customer and ask for additional data later.
• Verify the data that is provided.
• Be sure to understand the Ultimate Beneficiary Owner(s) for businesses.
• Set clear accountability within the organization for who is responsible for data integrity.
“Watch List” Screening &
Monitoring
• Evaluate 3rd party “watch list” providers to support Sanctions & Enforcement and Politically Exposed Persons (PEP)
screening.
• Dedupe your customer records as much as possible to prevent screening a single individual or business more than
once.
• When you investigate an alert, be sure to maintain an audit trail.
Enhanced Due Diligence
(EDD)
For higher risk customers, the top EDD information to evaluate is12:
• Criminal history
• Derogatory news (ideally from local sources that may be written in the native language, as well as international
sources)
•Citizenship
• Asset ownership
• Associates / relationships
Systems Management
• Configure data collection systems to centralize customer information and make it accessible to appropriate
personnel throughout the organization.
• Consider screening platforms that can check customer records against many lists concurrently and that have
sophisticated algorithms to reduce “false positives.”
Talent Management &
Training
• Benchmark your institution’s staffing levels to determine if levels are comparable to similar institutions. Hire the
best available talent to fill compliance roles. Develop a succession plan for grooming internal successors.
• Ensure that internal staff receives adequate training on systems and tools. Ask vendors how they can help to
support this process.
• Invest in compliance training through industry organizations and certification programs. Consider the training needs
of front-line employees who may be responsible for collecting customer data.
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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Level of Agreement with the statement:
Exposure to money laundering is considered a high-risk
area within your organization’s business risk assessment
100%
80%
61%
60%
34%
40%
20%
5%
0%
Strongly Agree (% 6&7 ratings)
Neutral (% 3-5 ratings)
Strongly Disagree (% 1&2 ratings)
On a scale of 1 to 7 where 1 means “strongly disagree” and 7 means “strongly agree”, to what extent do you agree that
exposure to money laundering is considered a high risk area within your organization’s business risk assessment?
Operational Challenges Faced by Organizations in
Complying with AML Regulations
Compliance for both local and global
AML regulations
51%
40%
Greater regulatory requirements
50%
44%
Complex regulations with wider KY
(Know Your Customer) obligations
48%
Growing volume of data
47%
9%
6%
45%
7%
49%
4%
Manual (time consuming) process
45%
49%
6%
Screening technology/process produces
too many false-positives
45%
49%
6%
Recruiting, training and retaining AML staff
43%
49%
8%
Lack of readily-accessible customer data
42%
50%
8%
36%
Existing processes are too difficult to change
0%
Big challenge (% 6&7 ratings)
53%
32%
Lack of senior management engagement
20%
11%
53%
40%
Neutral (% 3-5 ratings)
60%
15%
80%
100%
Small challenge (% 1&2 ratings)
On a scale of 1 to 7 where 1 means “not a challenge at all” and 7 means “an extreme challenge”, how would you rate each of
following in terms of being an operational challenge faced by your organization in complying with AML regulations?
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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Operational Challenges Faced by Organizations in
Complying with Tax-Compliance Screening Regulations
Complex regulations requiring more data
from customers
64%
33%
4%
Compliance for both local and global
tax regulations
61%
32%
7%
Growing volume of KYC (Know Your
Customer) data-capture requirements
59%
35%
6%
56%
Lack of readily-accessible customer data
Too many false-positive screening results
53%
Manual (time consuming) process
53%
Staffing and training issues in internal
departments
39%
43%
Lack of senior management engagement
40%
0%
20%
5%
8%
42%
49%
Existing processes are too difficult to change
Big challenge (% 6&7 ratings)
40%
42%
9%
48%
9%
47%
40%
Neutral (% 3-5 ratings)
60%
5%
13%
80%
100%
Small challenge (% 1&2 ratings)
On a scale of 1 to 7 where 1 means “not a challenge at all” and 7 means “an extreme challenge”, how would you rate each of the following in terms of being an operational
challenge faced by your organization in complying with tax compliance screening regulations? [’Don’t know’ responses were excluded from the results]
• Quality of source data; Availability of trained resources during remediation effort to balance
remediation and BAU(client onboarding); Absence of alert and case management tool in most
scenarios and in most scenarios it has to be customized. Delay in decision making by senior
management to make those investments
• Adapting to frequent change in Tax Laws
• Adverse Media tracking and availability of native script is one of the challenges from operations
perspective.
• Alerts/reporting by branches
• AML regulations are becoming complicated year after year
• AML Technology Solution and staff acquaintance with it
• Awareness in consumers should be spread by government and regulator, so that not only
financial institutions but consumers were made aware about KYC requirements
• Biggest challenge is turning deaf ear by the management in terms of staffing. Inadequate
staffing creates more stress and poor quality in performing investigation as management
wants the work to be completed before deadline. Pretending as if all the required quality is
maintained, in reality it is otherwise.
• Conduct/compliance of relationship manager and client facing staff
• Continuous change in rules and regulations and way of working
• Data dumped in some of the old systems is difficult to retrieve
• For the government to provide customer privacy
• Giving management visibility of ROI on compliance initiatives
What else would you add as a critical operational challenge that your organization currently faces
in complying with AML regulations?
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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AML Investment Areas over the Past 3 Years
Enhancing transaction monitoring systems
45%
46%
9%
Receiving, updating and maintaining KYC
44%
47%
9%
Implementation of FATCA
40%
50%
10%
Provision of training
36%
Increasing internal reporting requirements
35%
56%
9%
Procedural updates
34%
57%
9%
52%
12%
Maintaining sanctions lists
34%
53%
13%
Recruitment
34%
55%
11%
Anti-bribery and corruption acts
34%
Transactijon look-back reviews
51%
33%
High investment (% 6&7 ratings)
56%
20%
0%
15%
40%
12%
60%
Neutral (% 3-5 ratings)
80%
100%
Low investment (% 1&2 ratings)
On a scale of 1 to 7 where 1 means “no investment” and 7 means “very heavy investment”, how much AML investment would
you say your organization has put toward each of the following over the past 3 years?
Changes in Total Investment in AML Activity - Past and Future
30%
25%
25%
22%
19%
20%
17%
16%
14%
15%
14%
10%
7%
5%
15%
12%
11%
8%
7%
5%
5%
2%
0%
Total AML
Total AML
investment investment has
has decreased not changed
Increase of
less than
10%
Increase of
10%-24%
Amount total investment increased compared to 3 years ago
Increase of
25%-49%
Increase of
50%-99%
Increase
of 100%
or more
Don’t Know
Anticipated amount increase over the next 3 years
How has your organization’s total investment in AML activity increased compared to 3 years ago?
How much do you anticipate your organization’s total investment in AML activity to increase over the next 3 years?
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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Internal AML Structure and Staffing Changes over the Past 2 Years
Increased staff
67%
27%
Centralized all functions with HQ
Reduced staff
14%
No change
12%
0%
10%
20%
30%
40%
50%
60%
70%
How have your internal AML structure and staffing changed over the past 2 years? (select all that apply)
Level of Agreement with the statement:
Your organization’s Board of Directors takes an active
interest in AML issues
100%
80%
60%
57%
40%
40%
20%
4%
0%
Strongly Agree (% 6&7 ratings)
Neutral (% 3-5 ratings)
Strongly Disagree (% 1&2 ratings)
On a scale of 1 to 7 where 1 means “strongly disagree” and 7 means “strongly agree”, to what extent do you agree that your
organizatijon’s Board of Directors takes an active interest in AML issues?
AML and Tax Compliance in the Asia-Pacific Region:
Investing in KYC Systems, Data, and Processes
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