In a survey at the Thomson Reuters ASEAN Regulatory Summit 2016, 56.4% of 500 delegates said the most common area of misconduct in their jurisdiction was mis-selling financial products, followed by money laundering (23.5%) and market manipulation (11.5%).

In what may be a disappointing indictment of the state of AML readiness in the region, the Kapronasia report titled “2017 Asia Pacific Vendor Landscape: AML Solutions” cited immaturity of technology use at AML operations in Asia as well as limited understanding of the business implications of non-compliance is leading to a failure to comply with AML regulation in the region.

The AML industry in Asia has changed over time. In the past, most of the countries in the region were content to meet the regulatory requirements of the leading global markets, such as the U.S. However, in the last decade, a regulatory impetus has arisen to ensure that AML compliance platforms meet the specific local and national requirements across jurisdictions.

Large banks employ hundreds, if not thousands of professionals to manage their AML compliance requirements.

“AML technology is becoming an essential tool in the overall strategy to fight financial crime. Cybercrime, especially crime related to terrorism, has forced governments to focus on financial transaction processes in order to ensure the safety and legitimacy of the financial services industry,” said Anshuman Jaswal, Director at Kapronasia.

The Kapronasia report noted that without this technology firms would struggle to meet their requirements cost efficiently.

This figure would be much higher were it not for machine learning and greater commoditization of the underlying technology. A shared database provides an opportunity for banks to flag common threats faced by institutions.

“Firms need the basic capability to screen efficiently any customer or money flow against a range of highly dependable lists that cover the critical aspects of financial exposure. A LexisNexis Risk Solutions survey on financial inclusion and financial transparency revealed 87% of respondents in Hong Kong agreed they would be willing to collaborate with their peers to streamline client onboarding. In China, our study found 79% agreed they would be willing to collaborate with their peers to streamline onboarding, KYC activity and watchlist processing,” said Thomas C. Brown, senior vice president, U.S. Commercial Markets and Global Market Development, LexisNexis Risk Solutions.

Financial inclusion and transparency

The Kapronasia report further noted that banks will need to move from a previous “check-the-box” approach, to a more dynamic and proactive mindset. In the future, some of the most important regulatory requirements are expected to be around the issue of financial inclusion and financial transparency.

“Going forward, we are of the view that we’ll see increased mechanisms for financial inclusion. It’s going to take industry-wide and even cross-government action to help with that transparency through data sharing,” observed Brown.

David Haynes, LexisNexis Risk Solutions head of Asia, noted that big data, natural language processing and artificial intelligence are now commonly expected to play a key role in regulations, and meeting regulatory requirements, particularly in areas such as KYC.

“With the use of big data analytics, banks can analyze their trends in compliance, cooperate with other financial institutions which do the same, and then present a market-wide picture of compliance to regulators. This allows for better targeting of system-wide compliance monitoring and surveillance and even inform how they should frame regulation itself,” said Haynes.