University of Leicester eBulletin

Money Laundering Report Published

July 2002
No 145


A major new report out on Friday July 5 provides the first and unique insight into the financial sector’s perspectives on tackling money laundering. The main author, Professor Martin Gill of the University of Leicester’s Scarman Centre said: 

“The financial sector is in the spotlight post September 11th, we now know that they are struggling to cope with regulation. Not only is it seen as burdensome, in some cases regulatory requirements get in the way of tackling money laundering. While some of the findings from the survey are being addressed, money laundering and money launderers are part of a fast moving scene where little stands still for long. Research is important and we hope the financial sector will find these findings helpful and heed the warning that they contain.” 

The survey received a very good response from Banks (65.2%) and Building Societies (76.5%) and Insurance companies and Investment Companies were included.

· While over 90% of respondents believed that the regulation regime was effective, there was concern at the amount of work needed to comply, and 15.1% of respondents felt that the emphasis on achieving compliance could detract attention from the main aim of preventing money laundering.

· Most firms conducted money laundering training on an annual basis, despite being only required to train once every 24 months, but in 12.5% of respondents senior managers or directors did not take part in money laundering training.

· A central plank of regulation has been to force the financial world to ‘Know Your Customers’ (KYC). Yet, over a third of respondents believed that regulators placed too much emphasis on KYC.

· 58.2% of respondents believed that KYC procedures could lead to clients being alienated, and 46.3% believed KYC procedures could result in lost business.

· 64.1% believed that the KYC requirements do not adequately cover checks required on the associates of public servants or 'politically exposed persons'. 

· Many respondents felt that the regulatory agencies could do much more to help make KYC effective by facilitating access to databases; and by promoting public awareness that KYC is a legal requirement and not an imposition by financial institutions thereby reducing the level of client alienation experienced when implementing KYC requirements. 

· Only 6.2% of financial institutions were equipped with dedicated anti-money laundering software programs. 

· Most respondents were very negative about the capability of software to monitor transactions effectively, including firms in which such systems were used.

· Many financial institutions were very concerned that their commitment to tackling money laundering might be assessed on the number of suspicious disclosures submitted.

· Over 90% of institutions stated that internal reports were not disclosed to NCIS because following internal enquiries they were shown not to be suspicious. 

· A few organisations believed that, occasionally, suspicions may not be passed on because of a lack of means and a lack of time and this means that some parts of the financial sector are not doing all that is possible to counter money laundering. The minority fear that disclosing could undermine client confidentiality, more common amongst smaller institutions, raises a residual concern that merits attention.

· There was concern at the lack of feedback from NCIS, and this needs to be rectified. Many institutions require feedback to know what makes a good report.

Sally Scutt, deputy chief executive of the British Bankers' Association, whose members provided data for the survey said:

"We very much welcome this independent contribution by the University of Leicester Scarman Centre to an important debate. We are sure that all who are involved in the fight against money laundering will be keen to consider its conclusions."

A copy of the report written by Professor Gill and Geoff Taylor is available from the University of Leicester Scarman Centre, 154 Upper New Walk, Leicester, LE1 1QQ, price £25. 

NOTE TO NEWSDESK: Professor Martin Gill is contactable for interviews on 
0116 252 5709, mobile 0774 028 4286, or at home 0116 270 7742, email mg26@le.ac.uk

An ISDN line radio interview facility is available at the University of Leicester. This is located at audio visual services in the medical sciences building.

TO BOOK RING 0116 252 2919.

THE ISDN LINE NUMBER IS 0116 28 555 25.

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Last updated: July 2002
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