A clutch of international banks with operations in India were recently in the news for being involved in anti-money laundering (AML) activities, and helping anti-national elements to engage in terrorism and other illegal activities. The RBI is now scrutinising the systems of some of these banks, which have significant operations in India. KYC Norms, suspicious transaction reports, and cash transaction reports are some of aspects under review, according to the finance ministry.

One of the key questions raised was related to the deficiencies in the quality of work, which may be linked to the knowledge and experience of the staff who undertake such work. This raises further questions about the lack of of training programmes being conducted to ensure that employees have adequate knowledge required for conducting reviews or monitoring activities for complex financial transactions.

An ongoing employee training programme is an integral part of an effective anti-money laundering or counter terrorist financing programme — this has been suggested in the new Financial Action Task Force (FATF) recommendations released this year. The recommendations ask that regulatory or regional authorities place emphasis on adequate training mechanisms for employees of financial institutions. They also touch upon the need for evaluation of the effectiveness of these training programmes.

Training is a key element banks need to have in place as an important line of defence, so as to prevent and deal with incidents of employees committing offences under anti-money laundering regulations.

An effective training programme should be devised with a risk-based approach, and include modules with relevant and specific content. The programme should incorporate different learning styles, and test the knowledge and understanding of the trainees.

One of the findings of the KPMG in India’s AML survey 2012 stated that 40 per cent of the respondent organisations either have a common training module applicable to all the employees, or do not impart role-specific training.

Some of the critical success factors that would shape the approach of trainings include:

Relevance: Content should be role-specific wherever possible

Breadth: Choice of delivery channels should reflect the range of learning objectives and styles

Efficacy: A broad range of education, learning and development activities is required to deliver effective learning

Speed: After having identified where the greatest risks lie, it is important to take timely action to address the issue.

Banks need to invest in training programmes, and make them relevant to front-line staff through case studies and practical examples. This will help raise awareness about money laundering and equip the staff with practical skills and knowledge to apply the lessons learnt. Training programmes should also be in line with global standards and best practices, while ensuring that they have a process in place to monitor its effectiveness.

Having a complete training programme in place, as part of the overall anti-money laundering framework, helps to reinforce a culture of ownership, where employees feel empowered to point out the risks and take corrective actions. It is also seen as an alignment exercise to deliver transformational strategies in the evolving anti-money laundering and counter terrorist financing regulatory framework.

With increasing complexity in the business environment and technological advancements, anti-money laundering provisions are moving beyond traditional financial institutions, such as banks, to sectors like telecommunications. This is due to new payment mechanisms like mobile money, which offer anonymity, elusiveness, and rapidity of transactions, coupled with poor oversight as the payment channel is still evolving.

Now, more than ever, employees of banks and financial institutions need to keep constant vigil.

Rohit Mahajan is Partner and co-Head, Forensic services, KPMG in India

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