AML rules might change as costs grow

In many ways, 2012 was a groundbreaking year in terms of AML prosecutions.

The capstone has to be the whopping $875 million settlement prosecutors inked with HSBC for its dealings and lapses with Mexican drug cartel. In addition, Standard Chartered agreed to pay $375 million to settle money laundering-related charges with New York prosecutors. In the next year, we might see some more eye-catching settlements, as the likes of Bank of America, JPMorgan Chase and others seek resolution of AML issues that have cropped up recently.

AML compliance no doubt requires a massive IT investment, and as all the lapses have shown, the work can be quite tricky, not to mention costly. Celent has previously estimated that compliance costs would reach $5.8 billion in 2013, representing a hefty 7.8 percent average annual growth rate over the past several years. Software costs account for most of the projected increases.

So it is with interest that I note that the rules may be changing.

Quartz reports that bank lobbyists have succeeded in winning a change in the compliance criteria that in theory should make compliance much easier for banks. Currently, banks are required to verify the identity of account holders. Banks didn't necessarily do a good job with this, hence the lapses.

Going forward, the rules will change so that banks will not have to proactively identify account holders. Rather, they will ask account holders to self-identify. This makes life much easier for banks, but you've got to wonder how much teeth the rule will have in ferreting out the bad guys.

For more:
- here's the article

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The compliance lessons of HSBC's $1.9B fine