Criminal activity related to financial services not only affects the Bank’s business, but also hurts our customers and the communities where we do business. It can undermine the sustainability of our own growth and, by fuelling poverty and inequality, that of the economies we operate in.

International Monetary Fund (IMF) estimates suggest that money laundering globally accounts for between two and five per cent of the world’s GDP annually,¹ so tackling the threat is a major challenge for the entire financial sector. The banking industry needs to respond to this threat through industry-wide cooperation and constructive partnership with governments.

Standard Chartered monitors financial crime risk management through the Audit and Risk Committee and specialist Group and business committees at various levels including on-the-ground Country Operational Risk Groups.

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Financial Action Task Force (FATF), Money Laundering FAQ, January 2008

Anti-money laundering (AML) and terrorist financing

Money laundering is the process through which the proceeds from crime are disguised and concealed. At each stage of our operations, Standard Chartered strives to minimise the risk of our products and services being used by money launderers. During 2007, we launched revised, more risk-based, ‘Customer Due Diligence’ (CDD) standards across Consumer Banking.

Once an account is opened, the Bank uses sophisticated systems to detect suspicious transactions. The Norkom transaction monitoring system went ‘live’ across eight more countries in 2007, with enhanced reporting procedures for exceptional transactions implemented in more than
25 other countries.

Despite such automated systems, the vigilance of our staff remains critical. Our employee induction programmes make these responsibilities clear to new recruits. The Bank now passes several thousand suspicious activity reports to the relevant authorities every year.

In 2007, the Bank completed a programme to enhance payments screening in all processing centres and to improve its ability to identify transactions that may be linked to a terrorist suspect.

The Bank works closely with regulators, other banks and industry bodies, such as the Wolfsberg Group, to ensure that its AML control framework continues to reflect international best practice.

The Bank has also contributed to the development of new laws and industry guidelines in several countries, such as ‘Know Your Customer’ and transaction disclosure requirements issued by the South Korean authorities and the new Hong Kong industry guidance. In early 2007, the Bank joined representatives of the Basle Committee to train regulators from across Africa, who are in the process of implementing their own AML standards.

We recognise, however, that AML is a fast-evolving field. In late 2007, we engaged the services of the Promontory Financial Group, a leading consultancy, to ensure we keep pace with developments, continue to meet the expectations of our regulators and stay at the forefront of international best practice. We plan to refine our AML operating model based on their recommendations in 2008.

Fraud and corruption

Aside from the obvious financial impact on the Bank itself, we have a wider responsibility to protect customers from fraud and to contribute to the security and stability of the financial sector.

While fraud levels in the Bank have remained stable in recent years (indeed, they have fallen relative to the size of our business), we remain on our guard against new methods of attack and strive to reduce our losses. Like the Bank’s AML regime, our approach to fraud reduction uses a series of preventive barriers from front-line controls to a risk-focused internal audit programme.

To reduce the risk of employee fraud, in early 2007, the Group rolled out new procedures for staff screening and vetting at the point of recruitment. The Bank also reviewed its ‘Speaking Up’ programme, which provides employees with a confidential channel to raise concerns they may have about possible malpractice, with an aim to combat corruption. In 2007, over 25 reports were made, which helped the Bank to improve controls and reduce fraud.

More information is available on our website on the following topics:

• Group code of conduct.

Our goals and achievements in 2007

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Our goals for 2007	Status	What we have done
Migrate Norkom monitoring system to other major centres, including Singapore and Hong Kong	Completed	Implemented in Hong Kong, Singapore and six other countries
Deliver an anti-fraud action plan across Africa	Completed	Achieved a measurable impact on the incidence of serious fraud
Complete roll out of improved sanctions screening systems to all payments centres	Completed	All payments centres now ‘live’

“The automated transaction monitoring system, employed in the UK since April 2007, has proved to be an invaluable tool in assisting us in the fight against money laundering, and in helping us to meet our related regulatory and legal obligations.”
Dave Alonzo, Head of compliance, Private and International Banking UK