ABN Amro the Latest Bank to Show the Need for a New Solution to Money Laundering

It has been reported today that ABN Amro, the Dutch bank that is half-owned by the Dutch Government, is being investigated by the country’s public prosecutor. Though it has not revealed what that investigation entails, it has warned that ‘it could face fine for lapses in its client due diligence that may have allowed breaches of money laundering and terrorism financing laws’. In today’s post, we will look at the potential for this investigation, and assess this against the backdrop of what seems to be an increased commitment to compliance on behalf of ABN Amro, paradoxically. In light of a recent article I developed looking at Sigma Ratings, it is worthwhile considering their mission again in light of yet another massive breach of AML regulations, potentially.

Though the bank has been unable to declare what the investigation concerns, its suggestion that it may be regarding breaches in AML compliance have resulted in a 9.3% drop in the shares already. The article in the FT discusses how this investigation is likely to be part of a series of investigations throughout Europe. The Dutch public prosecutor fined ING €775 million last year for AML failures, and we have already analysed Danske Bank who, through their Estonian arm, were found to have laundered more than €200 billion of Russian and ex-Soviet money – coincidentally, the head of that Estonian arm was found dead this week. Since the FT article, Bloomberg reports that the prosecutor has stated that the investigation is concerned with ‘failing to report suspicious transactions and not conducting sufficient checks on its clients’, which falls directly in line with the suggestions from ABN Amro themselves. In July, the Dutch Central Bank forced ABN Amro to increase its reserves on account of pushing the bank to review all domestic retail clients under due diligence requirements. The bank actually went further by increasing its compliance spending and increasing the amount of compliance staff – according to the FT, ABN Amro increased its compliance staffing levels five-fold in five years, resulting in the bank having more than 1400 compliance professionals.

The problem here though is that, if it is the case that there have been breaches of AML laws and regulations, then clearly an increase in the amount of compliance professionals has done little to impact the bank’s overall compliance. Although it would be easy to blame the compliance professionals, research actually shows that the current AML regime is particularly punitive towards compliance professionals, so much so that it actually discourages going that extra mile to ensure compliance and has, ultimately, created a box-ticking culture that is becoming pervasive. It has even been suggested that the field of banking compliance is a ‘ticking timebomb’ for professionals, with increasing numbers choosing to move away from the sector. Furthermore, there are a number of initiatives being developed to counter stress and anxiety in the compliance field, as it is becoming clearer that there are underlying issues within the sector. So, if increasing the amount of compliance officers is not the answer, then what is?

It is, of course, difficult to declare the one solution to what is a myriad of problems. We spoke recently about Sigma Ratings and their mission to increase the amount of independent information within the sector. Understanding risk, particularly within the AML realm, is of vital importance and my recent article concluded that the mission of Sigma, and the way that it is going about achieving that mission, is particularly important. The article concluded that further AML-related scandals would only increase the need for Sigma’s product, and that has happened within weeks of the article being accepted for publication. It will be interesting to see whether ABN Amro is guilty of internal-based AML compliance failures, or whether it is related to their dealings with external-but-connected entities, like the model used within ‘correspondent banking’. If this investigation is related to something akin to Danske Bank’s dealings with its Estonian arm, then increased information like that which Sigma could theoretically provide would be particularly useful. It will certainly be worth monitoring this investigation and Europe continues to reel from a number of AML-related scandals.


Keywords – AML, ABN Amro, Banking, Compliance, Sigma Ratings, @finregmatters

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