Anti-Money Laundering: A Brave New World for Financial Institutions

by Neil Katkov, PhD, September 27, 2002

Abstract

Tokyo, Japan September 27, 2002

To achieve compliance with anti-money laundering regulations introduced in the wake of terrorist attacks of last year, the US banking, securities and insurance industries will spend a combined total of US$10.9 billion through the end of 2005, according to projections by Celent Communications.

In a new report entitled , Celent examines the extent of money laundering globally, and what financial institutions can - and in the US, must, by law - do to combat this widespread criminal practice.

Over the last 30 years, regulatory efforts and industry procedures to combat money laundering have been restricted largely to the banking world.  The terrorist attacks of last year have now ushered in a brave new world of anti-money laundering (AML) regulation for virtually the entire US financial industry, in the form of the USA PATRIOT Act.

Of the total cost to US financial institutions to comply with the Act, software and hardware will account for six percent of total spending, or US$695 million.  IT maintenance will account for 30 percent, or US$3.3 billion.  Employee training, reporting, and compliance will make up the remaining 64 percent of AML spending through 2005.

"In the brave new world of post-9/11 AML requirements, financial institutions will need to develop comprehensive procedures to combat money laundering and to ensure compliance with the new government regulations," says Neil Katkov, author of the report.  "Considering that AML practices - not to mention regulations - are an evolving art, keeping up with new technologies, methods and regulations will remain a challenging task for some years to come."

The report presents an overview of the global money laundering market, estimates the cost to the US financial industry of implementing AML programs to comply with the new regulations, and outlines what financial institutions should do to comply with these new rules.  The report contains 11 charts and 3 tables.

A is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

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Michele Pace
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Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Table of Contents

 

Tokyo, Japan September 27, 2002

Return to report Abstract

 

EXECUTIVE SUMMARY 3
MARKET OVERVIEW 4
  Money Laundering: How it Works 4
  The Scale of the Problem 5
  Regulatory Efforts 12
  International Efforts 13
  Enforcement 15
FINANCIAL SECTORS 17
  BANKING 17
  SECURITIES AND INVESTMENT 17
  Private Banking 19
  Mutual Funds 20
  Hedge Funds 20
  Securities Exchanges 20
  INSURANCE 21
  ONLINE FINANCIAL SERVICES 22
IMPLEMENTING AML PROCEDURES 23
TECHNOLOGY 26
  Size and Cost 28
CONCLUSIONS 30

 

        

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