SINGAPORE (Sept 2): When HSBC Holdings thwarted a US$500 million ($694 million) central-bank heist, sophisticated computer software did not raise the alarm. The funds flowed undetected from Angola’s reserves to a dormant company’s account in London. It was a teller at a suburban bank branch who became suspicious, declined a request to transfer US$2 million, and triggered a review that uncovered the scam, according to one account of the episode.

That was two years ago, and the finance industry’s battle to stop the illicit transfer of as much as US$2 trillion a year around the globe has not become any easier. At least half a dozen lenders in Europe have found themselves at the centre of fresh allegations of dirty money schemes in the past year. The wave of scandals — at Denmark’s Danske Bank, Deutsche Bank and others — is undermining confidence in the industry well beyond the individual institutions involved.

Financial services executives have had little choice but to significantly step up regulatory efforts; more than one in 10 now spend in excess of 10% of their annual budgets on compliance, according to financial adviser Duff & Phelps. Banks are eager to find ways to bring that spending down — management, employees and shareholders never want to spend on what are effectively internal cops. Today, there is a sense that growth may be peaking. About two-thirds of institutions considered systemically important on a global level, a leading indicator for the industry, expect the size of their compliance teams to either remain unchanged or shrink, according to a Thomson Reuters Regulatory Intelligence report. The largest companies want to adapt their teams to grow or scale back as necessary, the report says.

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