Friday, 24 April 2009

Cultural impediments to AML in Middle East

The UK's Independent newspaper was the first to report that ransom money paid to Somali pirates was being laundered via the Middle East. The newspaper quoted shipping industry investigators who claim that approximately $80 million (£56 million) had been paid out in the past year alone in ransom money to Somali pirates, with millions being laundered through bank accounts in the United Arab Emirates and other parts of the Middle East.

Dubai's deputy police commander general has since denied any involvement by the UAE saying it has strict anti-money laundering (AML) legislation that requires all transactions above 40,000 dirhams ($10,889) to be reported.

Yet, a common laundering technique is to split large sums of money up into smaller amounts so that it cannot be detected by AML controls. I also stumbled across an interesting article posted on the web by Hany Abou-El-Fotouh, director of Policy & Corporate Affairs at CI Capital, the investment banking arm of Egypt's Commercial International Bank (CIB).

He points to cultural factors, which he says makes the strict enforcement of AML procedures in the Middle East difficult. Abou-El-Fotouh says that in some Middle Eastern countries setting up proper controls and strictly enforcing them in order to detect suspicious transactions or activities, conflicts with customer relationships and cultural customs.

He says many Middle Eastern financial institutions are adopting corporate cultures that weaken AML and anti-terrorist financing efforts. "One of the biggest problems for AML initiatives in the Middle East is cultural customs that accept deference to customers and anonymity. Accounts lacking full identification details or with misleading information are not unusual in the region," he said.

Abou-El-Fotouh says Know Your Customer (KYC) requirements are lacking at many Middle Eastern financial institutions as customers may view banks' requests for additional information as intrusive or offensive. "For example, it can be difficult for a bank to refuse to enter into or to exit a relationship with a politically connected person," Abou-El-Fotouh explained. "Doing so could mean trouble for the staffer involved."




cash advance california said...

very well said. Thanks for the great news you've shared. Money laundering is one of the most difficult case. You need to trace all connected source of evidence.