Estimated global GDP’s 2 to 5% capital is a laundered money and $24 B has been fined globally. There are international bodies like FATF and Egmont which are working towards curbing this problem , by enforcing some policies but the compliance ,in reality, is still not up-to the mark. Not only banks which are supposed to follow this compliance but any MSB ( Money service business ) – exchange, gambling firm, mutual funds company etc is ideally under the purview of AML compliance . However, based on my research in my country India , it pains me to see the seriousness of regulatory bodies for the compliance and the earnestness of the financial institutions .

Every developed nation and developing nation which is serious about international compliance , is supposed to strictly follow the 40 guidelines given by FATF and also, should instruct its FIU( Financial Intelligence unit) to follow the guidelines of Egmont group- for example , in India we have FIU-IND, while US goes by FinCEN. Also, there are local laws , which further enhance policies to align the scenarios per the local situations , for instance- USA follows BSA act while India adheres to the PMLA act.

AML Compliance in India is still a distant dream , in reality- honestly the conviction is largely missing!.

“In recent years, RBI has imposed fines in ranges of 50 lakh to 1 cr to small , PSU and large banks, for lapses in AML compliance- for these banks it is really peanuts. Would these financial institutions ever be serious about compliance ,with such penalties?”

If you compare the penalties with Europe or US, you can easily make out how substantial is the difference in adhering to compliance .

$8.9 billion was the highest fine ever issued -levied by the US DoJ against a French Bank in 2015. Europe recorded their highest regional fine of $900 M in 2018 against a Dutch bank.

If you just go by above facts, then you can easily make out that in India penalties are at least 1000 times less.

It is not just about the penalties, it is about the attitude and earnestness about compliance.

As part of my research ,when I spoke to couple of people who were at senior positions in the industry and regulatory bodies, mostly retired, I was stunned to see the replies- which made me feel compliance is secondary while money is primary. Also, there were old of school thoughts – challenging me why even scans of global watch list is imperative . There is definitely need of overhaul, at least in the thought process.