In particular, measures of the potential future exposures arising from derivative positions with hedge fund counterparties were found in need of significant enhancements at some banks. In general, banks placed undue reliance on the collateralization of current mark-to-market exposures and underestimated the potential exposure that could arise under difficult market conditions.
To combat this effectively, we need to develop our training and tools to detect suspicious transactions, not only where the underlying offence occurred locally, but also where the offence may have occurred in another jurisdiction, quite possibly a distant part of the world. This requires a sophisticated approach to transaction monitoring by institutions, and to investigations by law enforcement agencies.