More than two-thirds of alternative fund managers have faced anti-money laundering fines or sanctions in the past two years, with nearly nine in ten expecting their organisation’s focus on AML management to intensify in the next couple of years due to escalating risks, said Ocorian, a provider of regulation and compliance services. The survey, of 101 senior leaders and compliance executives from firms managing a collective $132bn in assets under management, highlighted a significant rise in AML risks, with 73% of respondents reporting an increase over the past two years. Notably, 16% observed a dramatic rise in such risks.
The survey results, published on Tuesday 13 February, noted that, despite 99% of alternative fund managers affirming the serious attention AML management receives from senior management and their boards, approximately 70% have been penalised with fines or sanctions related to AML breaches in the last two years. Furthermore, a small fraction (4%) reported regulatory inquiries or visits within the same timeframe.
Ocorian noted that a substantial majority, 87%, anticipate an intensification in their organisation's focus on AML management in the coming 24 months, with nearly a quarter expecting a dramatic increase. This shift comes in response to both the growing risks and the current punitive landscape. Training appears to be a strong point for these organisations, with 93% of respondents confident in the adequacy of their staff's AML training, Ocorian said. Nonetheless, a small percentage (6%) still sees room for improvement. The research also found widespread consideration (94%) among alternative fund managers towards adopting AML software solutions to enhance efficiency and streamline internal processes.
Joe French, managing director and head of financial crime at Ocorian, expressed concern over the high incidence of AML fines and sanctions among surveyed firms. He also noted their reluctance to seek independent reviews for enhancing their AML infrastructure. French underscored the importance of a proactive approach to AML management, highlighting the challenges of recruiting suitable compliance staff and keeping abreast of regulations across different jurisdictions. He advocated for a ‘three lines of defence’ strategy to fortify businesses against AML risks: “Firstly, implement robust procedures, policies and training; secondly, comprehensively monitor these; and finally, review and challenge through independent audit.”
The executives polled worked at alternative investment firms located in Brazil, Germany, Hong Kong, Mauritius, Qatar, Saudi Arabia, Singapore, Turkey, the UAE, UK and US.
Updated 15 February 2024 at 9am, to add the number of executives polled and countries where they were located.