Are Banks Working Together Enough to Prevent Crimes?

LATIN AMERICAN FINANCIAL SERVICES ADVISOR, a publication of  Inter-American Dialogue, asks: Are Banks Working Together Enough to Prevent Crimes?

Q: Financial messaging service provider SWIFT said in January that more than 2,000 financial institutions worldwide had signed up for its centralized Know Your Customer (KYC) registry, through which companies can share information required for KYC compliance. How well does the registry and similar information-sharing efforts, such as Thomson Reuters Org ID and others, help banks with their compliance programs? What more must international financial institutions do to mitigate the risks of financial crimes? Are banks in Latin America and the Caribbean doing a good job of cooperating with each other? Are more global standards needed in this area, and if so, what should they include?

Marta García and Louis V. Martínez of Diaz Reus responding:

A: “In the past couple of years, both Latin American governments and private businesses operating in Latin America have shown a tendency to become progressively integrated into the global market. Integration to the global market requires these governments and businesses to attract foreign investment, which has created great competitiveness. One key aspect of this competitiveness is compliance.

The recent enhanced international standards, which many countries have been adopting in order to secure business in a safe, reliable and stable environment, have resulted in Latin American governments gradually adapting their own compliance-related laws to those of countries with the largest, most attractive markets.

However, no matter how attractive the market may be, complying with anti-money-laundering regulations is a highly complex and expensive task. But, although the costs can be extremely high, they pale in comparison to the fines that the financial sector has faced in the past couple of years for violating anti-money laundering regulations. To this end, KYC compliance systems help reduce the costs, while offering very attractive compliance solutions such as built-in risk rating engines to calculate customers’ current risk ratings, collect related-party information to highlight relationships and connections among customers and other parties of interest, and support in multiple languages.

The KYC systems have been praised and implemented worldwide. However, KYC systems could significantly improve and see a significant reduction in costs if the financial industry collaborated globally, creating commercially viable standards that all financial institutions worldwide could apply.”

Excerpted from FINANCIAL SERVICES ADVISOR, Feb. 11-24-16 edition. Read the full edition here: Download PDF.