The aim of money laundering is to transform illicitly obtained money into legitimate financess. By supplying fiscal services, some persons and organisations can acquire profit from the condemnable activities. Gilmore ( 1999 ) stated that even though Bankss are taking a major function in the battle against money laundering, some Bankss do non look to implement anti-money laundering processes earnestly. For case, HSBC, which is the largest banking and fiscal services organisation in Europe, was fined $ 700m in 2012 for assisting Mexican drugs barons to wash financess through the bank ‘s fiscal section for seven old ages in America. HSBC ‘s president apologized for the fact that the bank had had a weak anti-money laundering procedure for many old ages but failed to take action ( Mazur 2012 ; Maggetti 2012 ) . Additionally, some Bankss are back uping money launderers unconsciously ( Reuter & A ; Truman 2004 ) . For illustration, wire transportations are executed immediately and anonymously between Bankss. Dirty money is easy masked in the banking system and is transferred at an norm of $ 1 trillion per twenty-four hours through fiscal package, because on-line transportations are non supervised ( Liddick 2004 ; D.Muralidharan 2009 ) . Preventing and placing money laundering is an pressing planetary issue in order to keep the unity of the planetary banking system. The purpose of this essay is to measure anti-money laundering steps in the auditing processes of the banking industry, and measure these steps in footings of: reactive steps and proactive steps. This essay will concentrate on internal steps in the auditing processes. The first subdivision will discourse the reactive auditing steps, which are related to stop deading leery money and following leery financess can protect Bankss in exigency state of affairss. The 2nd subdivision will measure the indispensable to implement proactive anti-money laundering steps, which include study edifice, staff preparation, and internal control monitoring.
Effective reactive auditing step is a primary step, which can protect the bank in the event of an exigency state of affairs. Bank should stop dead and follow leery money at foremost, so better its internal control processes of anti-money laundering. Bank has the authorization of utilizing legislative steps to stop dead and impound the illegal income. When Bankss recognize or defendant that money laundering is exists in, the internal auditing section should use for freezing the leery money instantly ( Committee 2009 ; Hopton 2006 ) . Hearers can besides bespeak clients to open histories or look into clients ‘ beginning minutess ( Chatain 2009 ) . Stessens ( 2000 ) stated that Bankss should avoid transporting on minutess which they doubt or know are associating to money laundering, and all employees who found leery minutess in Bankss have duty to describe to the Money Laundering Reporting Office without hold. For illustration, in Switzerland, Bankss are required to stop dead the leery money, which they reported to the prosecuting authorization straightway. The authorization needs to give a feedback for upper limit of five yearss after the study has been submitted. The ground why Switzerland had made great advancement in anti-money laundering is that Switzerland ‘s banking histories are avoid to forestall illegal privateness information ( Reich 1998 ) . However, some Bankss maintaining on execute the leery minutess until they informed by the responsible authorization to battling money laundering ( Stessens 2000 ) . Some states even do non hold any cardinal national office covering with leery coverage. Kenya did non implement an effectual AML supervising system ( Lilley 2003 ) .
Furthermore, Bankss need to follow the beginning of dirty money after freezing leery minutess, even though it is hard to capture a dubious dealing for Bankss. Money launderers may utilize different types of minutess to laundering, for illustration, laundering is typically exists in electronic financess dealing and big hard currency dealing ( Beare & A ; Schneider 2007 ) . Nevertheless, comparing with the legitimate clients ‘ activities and the standard minutess, it is obvious to see that leery minutess are ever inconstant. Internal cognition of the client ‘s environment and personal information is helpful to Bankss to recognize whether it is unusual in minutess or non. Therefore, Bankss should understand each client ‘s concern in deepness, for illustration, know the client ‘s political state of affairs on his or her state by sing him or her ( Odeh 2010 ) . However, some Bankss ‘ director can non maintain independency with their clients. A good illustration is when people asked why private banker ne’er asked a client about certain minutess, the banker would react that the client was a president of a celebrated company. Maude ( 2006 ) stated that private bankers are trained to fulfill clients ‘ fiscal demands. Closely personal relationship between bankers and clients will heighten bank directors ‘ trueness to their clients for personal grounds. Additionally, closely relationship will take bankers to pretermit some warning signals, and some bankers may utilize Bankss ‘ fiscal systems to help money washing for their clients.
Furthermore, Bankss should beef up proactive auditing step within internal anti-money systems. Companies are required to develop appropriate internal control procedures, which include construct describing system, developing staffs and chariness of analogous Bankss, to cut down money laundering hazard ( Singh 2007 ) . On one manus, Bankss should construct anti-money laundering coverage system for observing and study leery activities to the authoritiess. As a fiscal establishment, bank demand to be familiar with uniting jurisprudence points with fiscal ordinance, and assist authorities to cover the money laundering job ( C.Roa 2007 ) . Harmonizing to the Bank Secrecy Act ( 1970 ) , bank should supply all required specific certification on the Currency Transaction Reports ( CTRs ) . However, some bank still disturbed anti-money laundering regulations. For illustration, Royal Bank of Scotland was fined ?750,000 of carelessness of client designation ( Singh 2007 ) . From the coverage system, non merely authoritiess want to have the feedback about the fraud that they had made, but banking industry can besides detect what failing the anti-money laundering system is holding ( Bowden & A ; Secretariat 1997 ) . After measuring the chance of the leery dealing, and comparing with the sensible background of the client in an bing coverage system, bank should supply appropriate study to the Money Laundering Reporting Officer ( Mwenda 2010 ) . Bank need to update their coverage system if the study is wrong. Nevertheless, money laundering still exists in some informal international minutess. About big hard currency minutess, some fiscal establishments are deficiency of coverage demands and less monitoring of cross-border currency motions ( Odeh 2010 ) . For case, there is no describing demand of cross-border currency minutess in the strong diamond market ( Lilley 2003 ) . Another major plan in anti-money laundering system is the Know Your Client plan ( KYC ) . Odeh ( 2010 ) stated that Know Your Client plan could place client ‘s environment and information at history gap. An progressing KYC system can assist bank to garner and update extra statistics in farther, and protect the bank ‘s hazard appraisal system quickly in exigency instances. In add-on, Hopton ( 2006 ) thought good understanding of clients can assist banker to find the clip and manner to describe leery activities. The KYC plan should be widely used in Bankss ‘ anti-money laundering systems.
On the other manus, the Anti-Money Laundering Officer should developing bankers and new staffs with anti-money laundering ordinances. Not merely all the staffs should be trained, but besides the paperss and records need be saved to demo that bankers had be trained and that developing were ongoing ( Lilley 2003 ) . For illustration, preparation records should include the Begin and terminal day of the month, the subject of the preparation and information of the staff ( Secretariat 2006 ) . All relevant bankers should good understand the purpose of anti-money laundering processs and implement AML constabularies earnestly. With different staffs, which may include new staff, gross revenues staff, senior director and staff covering with new clients, AML preparation demands should hold different focal points. For illustration, account opening staff is in the front- line of contending against money laundering, they should understand inside informations of AML ordinances good. To foreign exchange directors, the most of import affair is to place leery international minutess. As a fiscal direction manager, he or she can non execute their duty good without an overall position of anti-money laundering constabularies ( Chatain 2009 ) . In order to forestall the unity of Bankss ‘ anti-money laundering system, all staffs need to be suitably trained with the ‘know your client ‘ plan. Training should accordingly cover with the demands of cognizing client ‘s accurate individuality and background. Furthermore, fiscal establishments need to learn bankers to cognize how to understand the item information of the client well, which should include the type of client ‘s concern activity and the basic cognition of the concern ( Muller, Kalin & A ; Goldsmith 2007 ) . With the aid of staff preparation, bankers can understand the importance of maintaining independency with their closely clients within professional service. However, harmonizing to Beare and Schneider ( 2007 ) , while five Bankss stated that they had given lessons to their staffs with the sensing of dubious minutess and anti-money laundering processs, it was considered that at least one bank was given low degree preparation or might intend that no 1 in that bank had accept appropriate preparation. Banking industry should penalize the employees who were found in even reasonably light money laundering in bank, for case, the staff can be fired, set into the black book at other Bankss and even be charged.
At last, in order to anti-money laundering within foreign minutess, Bankss can reliance on their letter writer bank unless the letter writer bank had had fiscal frauds. Particularly, analogous bank tends to hold no direct relationship with each portion of the possible minutess. Therefore, it is difficult to corroborate their features and individualities. In add-on, analogous bank ever have fewer information to turn out the nature or purpose of the original minutess. For illustration, it is convenient for launderers globally to reassign through cyberspace, which including foreign currency exchange, treating electronic payments and importers or exporters invoice ( Lilley 2003 ) . Therefore analogous Bankss ‘ non-face-to-face minutess are regarded to be high hazard from a money laundering and terrorist funding position. In order to cut down the hazard of money laundering, Bankss are required to maintain every records and certifications of analogous bank minutess. Furthermore, the location of the respondent is considered to be another cardinal factor. Some low hazard countries such as the United Kingdom and China, which are the members of the Financial Action Task Force ( FATF ) , are holding purely supervising environment of anti-money laundering. Conversely, other topographic points, in which recognised globally of holding hapless anti-money laundering processs, are demoing extremely hazard of fiscal offense. In order to avoid the fiscal fraud from analogous Bankss and diminish the hazard of fiscal offense, bank managers should care of their corresponding spouses ( D’Souza 2011 ) . However, some foreign Bankss still did non hold on paper policies or steps for contending against the menaces lifting from analogous Bankss. Some other Bankss ‘ female parent companies were following with international anti-money laundering processs for letter writer banking, but there is no inside informations of minutess and its accurately application day of the month in the Bankss ‘ UK concern ( Liddick 2004 ) . To sum up, banking industry demand to see about the money laundering hazards in analogous Bankss. For case, merely few Bankss have report systems to cover with respondents, and precedence reappraisal higher hazard clients and foreign minutess. Failing to see of hazardous concerns, such as money service establishment and offshore bank, is another job within analogous Bankss.
In decision, this essay evaluated both reactive and proactive auditing steps of anti-money laundering in banking industry.