Soaring compliance costs clip wings of Mideast, African banks

Wed Dec 25, 2013 2:07am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By David French

DUBAI (Reuters) - While it may be the most common given name in the world, the global banking system seemingly can't cope with Mohammed and its various different spellings.

When it comes to false positives - where a person or transaction is incorrectly flagged for contravening sanctions - the total at Middle Eastern banks is around twice that of many international lenders because of the high use of names like this, said John Garrett, chief compliance officer at National Bank of Abu Dhabi NBAD.AD.

Rectifying these mistakes costs banks and their customers both time and money and highlights the rapidly increasing compliance costs which lenders in the Middle East and Africa must deal with.

Compliance teams face an increasing array of rules, both due to failings exposed by the financial crisis and as banks work with more partners around the world than ever before.

JP Morgan Chase (JPM.N: Quote) is due to spend an extra $1 billion on controls this year and had added 4,000 compliance staff since 2012, CEO Jamie Dimon said in September.

Such figures are far beyond anything banks in Africa and the Middle East can comprehend, let alone apply themselves.

Bank of Sharjah BOS.AD, an Abu Dhabi-listed lender with a market value of $1.01 billion, is more than doubling its compliance team in the next 12 months - to 10 people from four currently - its chief executive, Varouj Nerguizian, said. It is also spending millions of dollars on new software, he added.

Converging factors should be proving a boon for Middle Eastern and African banks.   Continued...

A man walks past a National Bank of Abu Dhabi branch, August 27, 2012. REUTERS/Jumana El Heloueh