The time when anti-money laundering (AML) regulation was primarily seen as a Western concern is rapidly drawing to a close. In recent years AML controls have arrived in Asia in force, emerging as a major focus for regional authorities, which are rapidly instituting or updating related policies to meet, and in some cases even exceed, global standards.
There are a number of drivers behind the reshaping of the regulatory landscape. At the global level, there is more political pressure for a concerted international effort to address money laundering and sources of terrorist financing. At the same time a number of connected compliance issues are undergoing rapid convergence. Tax evasion, for instance, has long been an area of concern for revenue departments, and it has been well known that gains from tax evasion find their way into the banking system. In the past it was difficult to tie data together in a way that allowed banks to easily identify whether funds received by an individual or corporation were tax compliant, particularly since the line between tax avoidance and tax evasion can be a fine one. Initiatives, such as the US Foreign Account Tax Compliance Act (FATCA), and its emerging global counterpart, GATCA, are aimed at bridging these gaps, generating more complete data from financial institutions and providing revenue departments with information sourced worldwide about their nationals and national corporations.
As many of the data touch points on tax evasion are related or even identical to those used in AML monitoring, it has become increasingly apparent to financial institutions that providing this data in context requires the reexamination and enhancement of their overall AML risk assessment programs, and in turn that any additional information they gather in the effort to identify tax evaders can be used to support AML monitoring processes. Firms that fail to connect these dots run the risk of being held responsible for not having been more diligent in monitoring for tax evasion and AML alike.
Unfolding on the global as well as the regional level, the recent burst of regulatory activity is therefore unlikely to lose steam. With governments more determined than ever to pursue tax evasion, the United Nations Office on Drugs and Crime estimating some $2 trillion is laundered every year and fines for non-compliance steadily rising, Asian institutions must accept increased scrutiny and compliance requirements around AML as the ‘new normal,’ and develop their strategies and practices accordingly.
Given the region’s mix of jurisdictions and the complexity and constant evolution of AML requirements, it is not surprising that many organizations find it a challenge to craft a sustainable framework to address AML issues. While being frank about the difficulties the proliferation of AML regulation entails, this paper, based on independent research and the input of Wolters Kluwer sector experts, will chart possible paths to a concerted approach to AML that not only enables compliance with regulations, but also contributes to the betterment of business practices and the institution as a whole.
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