eyetronic - Fotolia
Five major Dutch banks will work together to improve their ability to spot suspicious transaction activity as they fight against money laundering.
According to the Dutch banking association Nederlandse Vereniging van Banken (NVB), ABN Amro, ING, Rabobank, Triodos Bank and Volksbank are to set up an organisation that will monitor their combined transactions, with the aim of improving their chances of spotting and stopping money laundering.
The banks plan to jointly set up a standalone operation that will combine huge volumes of transaction data with their vast IT expertise to focus on anti-money laundering (AML).
The group of banks involved could expand beyond five if the project is successful.
Together, the five banks involved handle 9.8 billion payment transactions every year, or 27 million transactions each day.
Regulators are clamping down on money laundering, which is often linked to serious crime, and banks potentially face heavy fines for failing to prevent such activity. Banks have a vested interest in ensuring they are compliant with the regulations in place for catching and reporting money laundering.
Regulations have been in place for several years, and most large banks have systems in place to track and catch money laundering activity. Despite this, there are cases where the authorities have fined reputable banks for their failure to implement proper AML solutions.
ING was fined €775m last year after the regulator said the bank failed to prevent the laundering of hundreds of millions of euros between 2010 and 2016.
The Dutch banking association, NVB, said it would work with the initial five banks over the next six months to study whether the plan is feasible, given the technical and legal challenges involved.
“An estimated €16bn of criminal money is circulating in the Netherlands, most of which is connected to the drugs trade,” said the NVB.
“As part of their social responsibility, the banks are actively working on improving the effectiveness of their transaction monitoring in order to significantly increase the return from identification, detection, prosecution and conviction of criminal conduct,” it added. “The combining of transactions effected by the various banks is expected to make it easier to spot flows of criminal funds.”
Banks working together on IT which is non-competitive has proved successful in the past. For example the Society for Worldwide Interbank Financial Telecommunication (Swift), which is owned by banks, is a good example.
The not-for-profit co-operative that provides a network to send financial transaction messages was set up in 1973. It enables banks to share communications infrastructures and has added hundreds of banks and many new payment-related services over the years. Swift demonstrates how even companies engaged in cut-throat competition can share core business processing.
The increasing use of financial technology (fintech) platforms and technologies such as blockchain is further increasing collaboration and joint piloting of applications and schemes. Banks are sharing the risk when it comes to testing out new technology that promises to make them more efficient and compliant with regulations.
Anti-money laundering is a regulation that consumes a great deal of bank resources. The NVB estimates that up to 6,000 bank employees in the Netherlands are currently working directly and full-time on addressing the problem of money laundering.
Read more about the battle against money laundering
- Danske Bank improves its anti-money laundering software, utilising artificial intelligence and machine learning.
- Financial services watchdogs inform banks that they must do more to improve anti-money laundering systems.
- Money laundering was back at the top of the agenda recently when, on 26 June, the European Union’s Fourth Anti-Money Laundering Directive came into force.
Read more on IT for financial services
ABN Amro investigation lends weight to anti-money laundering collaboration by Dutch banks
Danske Bank invests in anti-money laundering systems following Estonian problems
HSBC adopts fintech to fight money laundering
Nordic finance watchdogs losing patience over anti-money laundering systems at banks