AML & CFT Risk Management in Emerging Market Banks
March 04, 2021
Why Should a Bank like Yours Invest in the Development of a Robust AML/CFT Program?
A robust AML/CFT program requires a substantial investment because it calls for not only a sufficient number of
experienced resources but also for advanced technology that can support the bank’s AML/CFT compliance function
to better identify, measure, monitor, control, and report on Money Laundering/Financing of Terrorism (ML/FT) risks.
So why should a bank like yours want to make this investment?
Having a robust AML/CFT program offers multiple benefits to your bank. Consider that:
• An AML/CFT program can mitigate the risk faced by a correspondent bank in doing business with you if your
bank is located in a high-risk jurisdiction and can bring the overall residual risk to a level acceptable to your
• Your ability to obtain and retain CBRs will enable your bank to provide the full spectrum of offshore banking
services demanded by your high-value banking customers.
• If your correspondent bank is satisfied with your customer due diligence standards, it will likely be receptive to
providing payable-through-accounts services you may need.
• Having robust systems and technologies will provide your bank with required capabilities to participate in KYC
utilities used by some large correspondent banks. Such KYC utilities have the potential to improve efficiency
and lower costs because of a lesser amount of documentation being exchanged. Lower costs have the
potential to make CBRs more attractive for correspondent banks that have indicated these relationships have
become unprofitable. Additionally, new technologies may lower your own compliance costs over the long run.
• Failure to have an effective AML/CFT compliance program can result in enforcement action from the
supervisory authorities that generally include large fines in addition to:
• Heightened regulatory scrutiny;
• Pressure on the bank’s funding and liquidity;
• Costly remediation efforts and high legal costs;
• Civil and criminal liability of the board of directors/senior management/other employees;
• Shareholder lawsuits against board of directors/senior management for lack of oversight and negligence;
• Reputational damage;
• Lack of foreign direct investments; and
• Higher cost of borrowing in the international arena.
The International Finance Corporation (IFC), the private sector arm of the World Bank Group
(WBG) and one of the leading investors and lenders in emerging markets recently published a report which provides best practices and principles for managing AML/CFT risks for banks in emerging markets. The report clearly outlines the essential elements of a sound AML/CFT program which will guide you in your journey to strengthen AML/CFT capabilities. Read the full report here
Procurement Fraud Schemes - Categories
Types of Procurement Fraud Schemes and their Red Flags Although there are many types of procurement fraud schemes, this discussion focuses on procu...Continue Reading