20 Dec 2017

Companies 'needlessly' de-risking over sanctions and money-laundering

In some cases, re-risking can be more risky, according to global advisory group AlixPartners.

Alexander Supertramp

Financial institutions may be disassociating themselves needlessly from otherwise-profitable businesses and relationships over risks related to money-laundering and sanctions-related investigations, according to new research.  According to AlixPartners, nearly two-thirds (63 per cent) of respondents have experienced de-risking in one form or another—a trend that, says the survey, ironically could increase institutions’ AML and sanctions risks, as customers seek other avenues for conducting their business with the institution, such as creating “nested” relationships in the case of correspondent banks.This could be even more difficult to detect and subsequently report potentially suspicious activity and/or sanctions violations.

Inadequate budgets

Meanwhile, 32 per cent of respondents say they consider the AML and sanctions-compliance budgets at their firms to be 'inadequate' or 'severely inadequate.' At the same time, one in five say their board is not receiving AML and sanctions training and regular briefings, despite many new compliance standards having recently been implemented around the world.


According to the survey, one way that institutions are continuing to step up their compliance efforts is through technology, with a majority of respondents (54 per cent) saying AML and sanctions compliance monitoring systems are their top investment areas for the next 12 to 24 months. 'Robust IT systems and the relevant input information are a critical component of AML and sanctions compliance,' Sven Stumbauer. AlixPartners.  'Institutions feel having the right kind of tools is imperative to detecting and reporting on suspicious activity or potential sanctions breaches, which is showing no signs of slowing. However, not all institutions believe their current systems are adequate or sufficiently fine-tuned.'

Formal AML programmes

On a positive note, a clear majority of financial institutions are taking their AML and sanctions compliance obligations seriously, according to the survey, with 92 per cent of respondents saying their firms have a formal AML and sanctions-compliance programme in place. However, 35 per cnet say their firms do not perform independent annual reviews or benchmarking reviews of these programmes.


The AlixPartners 2017 Global Anti-Money-Laundering and Sanctions Compliance Survey surveyed financial-services executives and boards of 361 financial institutions around the world.