Fighting money laundering

WITH so much spotlight on penalties for busting US sanctions, money laundering has become an intensified area of focus for authorities worldwide.

Malaysia and Singapore, which already have rules in place for money laundering, are looking at imposing stiffer penalties.

In Malaysia’s latest Anti-Money Laundering and Anti-Terrorism Bill (Amendment) Bill, one of the objectives is to allow for more effective enforcement and prevention through punishment and heavier penalties, said Bank Negara.

The Monetary Authority of Singapore is also looking to publish details of more severe penalties on financial institutions linked to breaches in anti-money laundering and counter-terrorism financing rules, said the Singapore Business Times.

Malaysia will also be going through the process of mutual evaluation by a regional body called the Asia/Pacific Group on Money Laundering.

This is to assess its level of compliance with the anti-money laundering and counter-financing of terrorism standards issued by an international body called the Financial Action Task Force, said Bank Negara.

A believer in taking pre-emptive steps, Bank Negara thinks this initiative will help Malaysia increase public and investors’ security and confidence in the financial system.

Finally, BNP Paribas is getting away with a lower penalty of US$8.8bil compared with an earlier estimate of US$16bil.

The bank has pleaded guilty to violating US sanctions which forms part of a wider investigation into more banks and financial firms.

Two other major French banks, Credit Agricole and Societe Generale, Germany’s Deutsche Bank AG, and Citigroup Inc’s Banamex unit in Mexico are among those being investigated for possible money laundering or sanctions violations, said

Reuters, quoting people familiar with the matter and public disclosures.

At the heart of this effort is a 12prosecutor Money Laundering and Bank Integrity Unit within the US Justice Department that was created in 2010.

It handled the investigation into BNP for US sanction law violations, primarily involving Sudan deals, as well as large money laundering and sanctions cases in recent years against HSBC Holdings Plc, ING Bank NV and others, said Reuters.

After digging into the large banks, the unit is increasingly investigating actors across the two dozen types of companies covered by the Bank Secrecy Act, said Reuters, quoting sources.

Among the sectors covered by the act are broker-dealers, jewellery and auto dealers, casinos, insurance companies, and shipping companies.

China is not only high on corporate debt.

Its top banks accounted for almost one-third of a record US$920bil of profits made by the world’s top 1,000 banks last year, said Reuters, quoting a survey by The Banker’s magazine.

China’s banks made US$292bil in aggregate pre-tax profit last year, or 32% of the industry’s global earnings, according to the magazine’s annual rankings of profits and capital strength of the world’s biggest 1,000 banks.

Last year’s global profits were up 23% from the previous year to their highest ever level, led by profits of US$55bil at Industrial and Commercial Bank of China (ICBC), said Reuters.

China Construction Bank, Agriculture Bank of China and Bank of China filled the top four positions.

However, annual profit growth of China’s banks could slow as they face increased liquidity and lending risks due to slower economic growth and Beijing’s battle on excessive factory capacity, said Reuters, quoting a report by the China Banking Association.

This may show the Chinese banks’ rise in power after the financial crisis but in view fof increased risks, they are a group to watch out for.

Already, auditor’s checks have revealed certain abuses in giving out loans.

Banks may see a rise in non-performing loans (NPLs) this year from small firms in the export sector and companies gripped by excessive capacity, the banking association said.

Average NPL ratios for commercial banks were at a three-year high of 1.04% at the end of March, above the 1% red line for China’s banking regulators.

Banks should closely check on loans for the property sector and local government financing vehicles, the association said.

China’s banking association is monitoring the NPL situation and in line with the global focus on property financing, has issued a warning especially on property loans.

Source: The Star (07 Jul 2014)