More Money Spent on Anti-Money Laundering Initiatives

This press release is an in-depth study from WealthInsight on anti-money laundering (AML) initiatives taken by governments and regulatory bodies across the world to combat rapidly growing money laundering activity. It follows on from WealthInsight's report, entitled: 2020 Foresight Report: The Impact of Anti-Money Laundering Regulations on Wealth Management

Today illegal money laundering activities account for 2-5% of the global GDP, ranging between US$800 billion and US$2 trillion, according to the United Nations (UN). To fight the global battle against money-laundering, governments and regulatory bodies have been introducing increasingly stringent anti-money laundering (AML) regulations. According to a new forecast report from WealtInsight, global AML spending grew from US$3.6 billion in 2008 to US$5.3 billion in 2012, at a compound annual growth rate (CAGR) of 10.18%. This trend is set to continue to reach US$8.2 billion in 2017.

Recent developments in global AML regulation include the launch of new FATF money laundering recommendations in 2012; the Foreign Account Tax Compliance Act (FATCA) in the US; and proposals for the Fourth Money Laundering Directive by the European Commission (EC) in 2013. These initiatives are intended to strengthen the global AML regulatory environment and increase pressure on financial institutions to comply.

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Failure to comply with these new standards could damage companies’ finances and reputations. A number of financial institutions such as UBS, HSBC, Axis Bank and HDFC were prosecuted by regulatory authorities after instances of money laundering activities were found. As a result, WealthInsight predicts that spending on operational compliance (such as training employees, analysing customer data and reporting to authorities) is expected to grow from US$4.4 billion in 2013 to US$6.2 billion in 2017, at a CAGR of 8.89%. Technology spending is expected to grow from US$1.4 billion in 2013 to US$2.0 billion in 2017, at a CAGR of 8.78%.

While AML compliance in North America and Europe is highly developed, it is yet to reach these standards in a number of emerging economies in the Asia-Pacific, Middle East and Latin America. Many countries in these regions have formulated AML regulations in the past, but effective enforcement by local regulators has been the key challenge. However, governments and regulatory bodies in these nations have demonstrated their interest in bringing their AML compliance in line with international standards.