Financial institutions expected to invest heavily on fraud protection

Published: 00:00 August 8, 2011

http://gulfnews.com/business/banking/anti-money-laundering-spending-seen-to-grow-1.848526

Dubai: Technological spending by financial institutions in bid to ward off challenges like money laundering and fraud activities is going to grow drastically in the next couple of years.

Anti-money laundering (AML) compliance continues to evolve nearly 10 years after 9/11, due to increasing regulatory demands and as a result, the cost of running an AML compliance program me continues to rise. Financial institutions are seeking efficiencies in operations and technologies.

According to Neil Katkov, senior vice-president, Celent, spending on AML compliance, including operations and technology, will reach $5.8 billion (Dh21 billion) globally in 2013, including $1.4 billion on internal and external technology spending.

Celent expects that operations accounts for $3.8 billion and technology this year, including internal and external IT spending, makes up the other $1.2 billion.

"Financial institutions are boosting their security budgets on sophisticated security intelligence which can monitor, detect and identify money laundering and fraud activities in financial transactions," Hazem Mulhim, CEO of EastNets, said. "Technology grows and at the same time crime also grows. They work in parallel. It is a continuous process of enhancement and encountering the fraudulent activities. Of course, investing in protection is better than investing in curing," Mulhim said.

Julie Conroy McNelley, senior analyst with Aite Group, said that AML technologies have been enjoying a fresh wave of demand across the globe during the last few years, driven by the convergence of increasing regulation, high profile regulatory enforcement actions, and next-generation technologies that can address both AML and fraud management needs across the enterprise.

Integrity

Left unchecked, McNelley said that money laundering can undermine the integrity of any financial system and embroil individual financial institutions in share-crippling financial scandals, calling for collective efforts to deal with it "ruthlessly".

McNelley said that financial institutions should evaluate their current AML compliance mechanisms to determine whether they have progressed with the changing times — regulators are certainly doing so during examinations.

According to Aite report, the global AML software market is expected to rise 14.44 per cent to $515 million this year compared to $450 million last year. The market is expected to grow at an annual rate of 9 per cent to reach $690 million in 2015.

"The Aite report has given us a comprehensive view of today's AML segment along with what is currently being demanded by global businesses. We are currently witnessing an increased demand for strategic solutions that deal with money laundering, fraud and other forms of financial abuse and SAS is looking to play a major role to help reduce the occurrences of these financial crimes but also drive in more productivity and efficiency," said Jonathon Saunders, Sales Director, SAS Middle East.

"All financial institutions should ensure that their vendor solution can offer a comprehensive collection of rules to cover the AML typologies and scenarios for which regulators will be looking, and that those rule sets are easy to tailor for each country. Financial institutions should ask their vendor whether they provide a sandbox where rule changes can be tested."