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ABN Amro Faces Criminal Investigation: Bank Had Seen Trouble Brewing…

Bank reported net profits of €693 million last quarter

By CBR Staff Writer

State-controlled Dutch bank ABN Amro is facing a criminal investigation for allegedly failing to report suspicious transactions, a month after warning that the country’s regulator had asked it to review the transactions of five million customers — and promising to sharply ramp up Customer Due Diligence (CDD) spending.

The report is the latest body blow to Europe’s banks, which are facing increased regulatory scrutiny, along with macroeconomic headwinds caused by low interest rates and other structural factors. The bank appears, however, to have been acutely aware of growing risk and the need to beef up its compliance team.

In its full-year 2018 earnings report, CEO Kees van Dijkhuizen noted: “We [are] accelerating our CDD remediation programmes”, saying the bank had set aside €85 million in Q4 to do so. The following quarter, he said that the bank had earmarked a further €114 million for CDD, saying the diligence team had hit 1,000 and he would be expanding it aggressively further. Trouble appears to have been brewing.

(ABN Amro said it cut personnel costs by €26 million last quarter).

ABN Amro: CDD is Hurting Profitability… 

CEO van Dijkhuizenbut warned last month that Dutch regulators had called on it to review all retail customers: “Sanctions, such as an instruction, fines, may be imposed by the authorities,” he told investors in a quarterly earnings report.

Compliance teams at such lenders say they face an overwhelming and snowballing pile of alerts about potentially risky transactions and with banks looking to trim costs in the face of macroeconomic headwinds, are often stretched thin.

ABN Amro’s full year earnings report bewailed the impact to profitability of having to do so, noting: “net profit was impacted by additional costs of accelerating CDD”. (Revenues at the world’s 12 biggest investment banks hit a 13-year low in H1, 2019, although ABN Amro reported net quarterly profits of €693 million this August.)

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Banks are Looking to Automation to Help 

The news comes as banks continue to try and weave greater levels of automation into their risk management. HSBC reported this week that it had signed up the UK’s Quantexa, which uses big data, advanced analytics and automated “contextual monitoring” to detect and disrupt financial crime in international trade.

HSBC screens over 5.8 million trade transactions a year for signs of money laundering and other financial crime, but Quantexa’s software is only being used in the UK and Hong Kong. HSBC says it is rolling it out across its global network, and has also introduced an in-house developed, automated first line sanctions checking tool that is powered by machine learning technology. Automated sanctions checking is now live in India and will be deployed in 41 markets by year-end, it said.

Tackling Payment Fraud

Banks are also rolling out technology to tackle payments fraud. Today the UK’s TSB said it had partnered with Vocalink to deliver Confirmation of Payee for its customers.

Currently, when making payments, the account name is not checked when sending an electronic payment – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account. The system aims to tackle Authorised Push Payment (APP) fraud, which cost UK victims £354 million in 2018.

Mastercard-owned Vocalink says it has trained its system on 20 billion transactions, and its automated solution will match the name of the account holder to the sort code and account number with a higher degree of accuracy than a simple direct name match.

Over at ABN Amro meanwhile, shares are down 11 percent and investors will be waiting to hear more about the precise nature of the probe.

See also: How to Use AI to Spot Mobile Bank Fraud using Microsoft Azure


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