News of a huge data leak at Credit Suisse, one of the world’s largest private banks, has re-emphasised the importance of proper due diligence processes for banks and financial institutions.
The leak, made to the German newspaper Süddeutsche Zeitung by an anonymous whistleblower, has exposed the hidden wealth of some 30,000 Credit Suisse clients worldwide, who The Guardian claims hold a combined total of more than CHF100bn (£80bn) with the bank.
The data, which has been used by journalists at 48 media outlets in a months-long project coordinated by the Organized Crime and Corruption Reporting Project (OCCRP), suggests that some of the bank’s accounts had been used by clients involved in "torture, drug trafficking, money laundering, corruption and other serious crimes”, according to The Guardian article.
Know your customer
In its response, Credit Suisse has pointed out that the allegations are “predominantly historical” and has strongly rejected any notions of misconduct by its staff. The bank has claimed that all its past actions were “taken in line with applicable policies and regulatory requirements at the relevant times, and that related issues have already been addressed”.
But an article in TechHQ suggests that the findings are a “lapse in judgement” by the bank and demonstrate a failure to implement proper know your customer (KYC) processes.
KYC processes – a set of measures allowing banks and financial institutions to confirm the identity of organisations and individuals they do business with, and to ensure they’re acting legally – have received increasing focus in recent years due to the extent to which financial crime is growing, both in scale and ambition.
According to data from the World Economic Forum (WEF), illicit proceeds from criminal activities now account for an estimated 2–5% of global GDP (around US$2tn), “yet less than 1% is ever seized or frozen by law enforcement agencies – the current anti-money laundering (AML) regime is not fit to combat a crisis of this scale”, says the WEF.
In comments appearing in an article for PYMNTS, Annegret Funke, head of financial crime at Featurespace, a machine learning software developer, says that the prevalence of financial crime in the world today proves that banks are doing too little to update anti-money laundering processes.
She blames the inadequate responses from banks and financial institutions towards money laundering on a general lack of transparency in financial systems globally.
Look closer
Banks can do more to tackle money laundering by focusing on the source of funds they receive. To do this, Funke says that it’s critical to be able to clearly identify clients, and link them to their money, at the beginning of the banking relationship. The
PYMNTS article quotes her as saying: “The first place I would start is with an ‘overlay’ of several layers of controls,” and she adds that different bank departments should be given the ability to raise AML concerns independently from one another.