04 August 2017

Banks have vital role in fighting financial crime

In Singapore - a financial hub - the government, law enforcement agencies and banks work in concert to gather and share intelligence.

First published in The Business Times, 28 July 2017

FINANCIAL crime has in the past had connotations of being "low impact", but this belies the devastating effect it has on people and societies.

It threatens livelihoods, ruins companies and bankrupts individuals. The United Nations Office for Drugs and Crime estimates that between US$800 billion and US$2 trillion is laundered globally each year, representing between two and five per cent of the world's gross domestic product.

But apart from the criminal impacts, there are other societal impacts that might be closer to home. According to the LexisNexis True Cost of Fraud study, every dollar of fraud costs merchants (and ultimately you, the consumer) US$2.40.

Every dollar money laundering siphons away is a dollar more that supports drug trafficking, human trafficking, terrorism and organised crime. Every dollar lost to tax evasion is a dollar less in social programmes like affordable childcare centres and public-health subsidies.

Singapore's economic openness, regional financial hub status and well-developed business infrastructure means we can never be immune to threats of crime such as corruption, terrorism and money laundering coming from outside our borders. When seen from this lens, it becomes something that all of us in Singapore should have a stake in.

In the fight against financial crime, banks play a key role, and sharing information is vital.

Within the Singapore context, the government, law enforcement agencies and banks are working in concert to gather intelligence and share information. By pooling our combined experience and resources, we can better focus our collective efforts in the fight against financial crime.

Just this past April, Singapore launched the Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP) led by the Monetary Authority of Singapore (MAS) and Commercial Affairs Department of the Singapore Police Force. ACIP brings together industry participants, regulators, law enforcement to identify, assess and mitigate financial crime.

Banks exchange data with public authorities inside strictly defined parameters designed to balance privacy and data security with the need to tackle serious problems including human trafficking and terrorist financing. HSBC is one of eight banks in this partnership.

As MAS assistant managing director Chua Kim Leng said in his keynote speech at the Association of Banks in Singapore (ABS) on Thursday, the MAS - through its bank inspections and engagements - has also heightened its emphasis on banks driving the right "tone from the top", in order to more fully instil greater understanding of financial crime among its employees and to embed a culture of active financial crime-risk management.

The MAS has also said it is important for Singapore to work smarter in fighting financial crime in areas such as the banks' approach to their "Know Your Customer" (KYC) due diligence and through its use of technology.


KYC is critical in the fight against financial crime.

Each bank needs to perform this for all its customers; conversely, from customers' perspective, they too have to undergo this process with each bank they have a relationship with - which can be multiple times.

To mitigate the overlap, the Singapore government is trying out MyInfo, Singapore's national digital platform through which residents submit their personal data, to enable more efficient KYC that avoids duplication of efforts for banks and customers.

The trial is being led by the island's Smart Nation and Digital Government Office and Government Technology Agency, in collaboration with MAS.

For its part, HSBC has implemented a globally consistent and improved customer due-diligence process over the past few years.

By knowing where customers live and work, the type of business they operate, the products and services they want and how these will be used, we can effectively assess any potential financial crime risk and safeguard our customers.

Since 2012, we have designed and implemented, across all our operations worldwide, consistent global policies on anti-money laundering and sanctions, with standards often extending well beyond local laws.

Last year, we spent US$3 billion on regulatory programmes and compliance, including investment in our financial crime-risk programme; we delivered more than 3.1 million hours of training to employees.

In keeping with the comments by the MAS, we are trying to work smarter in our adoption of technology too.

We are also trialling the use of Artificial Intelligence to improve our ability to target potential financial criminal activity.

Traditional transaction monitoring systems generate significant amounts of false leads. By trialling Artificial Intelligence and machine learning, we hope to take some of the "noise" out of the system, which frees us up to focus our investigation work more effectively.

Early indicators have shown the number of investigations dropped by 20 per cent - without a fall in the number of cases referred for more scrutiny.

Every day around the world, acts of financial crime like identity theft or card fraud put our customers at risk. These seemingly unconnected acts are often part of a significantly larger issue. Left unchecked, sophisticated criminals use the financial system to bank the profits of systematic illegal activity.

As international markets become more interconnected and complex, and threats to the global financial system grow, we will continue to adapt our approach to stay a step ahead.

Sharing of these technologies and our global experience, and being active participants in intra-industry collaborations, like the ACIP in Singapore, is how we can do just that.


This document was prepared by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch (“HSBC” or “we”) and published in The Business Times in Singapore on 14 June 2017.

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