Money-Laundering and Sanctions Risks Not Being Adequately Prepared for by Financial-Services Institutions, According to AlixPartners Executive and Board Survey

Nearly two-thirds have undertaken ‘de-risking,’ perhaps needlessly; nearly one-third have inadequate compliance budgets; 20% provide no training to their boards

NEW YORK (Dec. 20, 2017) – Even though financial institutions are perhaps more aware than ever of risks related to money-laundering and sanctions-related investigations, many of them may be “de-risking”—disassociating themselves, perhaps needlessly, from otherwise-profitable businesses and relationships. And, at the same time, a significant number lack both adequate anti-money-laundering (AML) and sanctions compliance budgets and training for their boards. That’s according to a survey of financial-services executives and boards of 361 financial institutions around the world released today by AlixPartners, the global business advisory firm.

According to the AlixPartners survey, nearly two-thirds (63%) 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.

Meanwhile, 32% of respondents say they consider the AML and sanctions-compliance budgets at their firms to be “inadequate” or “severely inadequate.”

And, in what is perhaps a sign that an understanding of AML and sanctions risks hasn’t fully permeated the upper reaches of many financial institutions, 20% of respondents 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.

“As with all matters important to a financial institution, success in AML and sanctions preparation hinges on having clear support from senior management and the board,” said Sven Stumbauer, a managing director in the Financial Advisory Services practice at AlixPartners. “If you want to create a culture of compliance, the tone and expectations need to be set at the top and supported by ongoing education and training.”

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%) 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,” added Stumbauer. “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.”

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% of respondents saying their firms have a formal AML and sanctions-compliance program in place. However, 35% say their firms don’t perform independent annual reviews or benchmarking reviews of these programs.

About the Survey

The AlixPartners 2017 Global Anti-Money Laundering and Sanctions Compliance Survey surveyed compliance, risk management and legal executives, C-level executives and board members from a diverse group of financial institutions, both online and through interviews. The institutions included a range of global financial institutions, including retail, corporate and business banking; private banking and global wholesale banking; broker/dealers; asset managers; insurance companies; money-service business (MSBs); and other types of financial institutions, including sovereign central banks.

About AlixPartners

In today’s fast-paced global market, timing is everything. You want to protect, grow or transform your business. To meet these challenges, we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters.