As financial crimes continue to increase, financial regulators have increased scrutiny at the financial services sector to improve their anti money laundering compliance regimes. The constantly changing regulatory framework calls for the implementation of effective AML compliance systems across banks and financial institutes. Thus the pressure on executive management has increased substantially to work to develop sustainable compliance management. The question then arises that can a bank convince their regulators that their AML systems are satisfactory and fulfill their purpose.
Organisations need a balance of technology and human resources to implement AML regulations. Such a balance, combined with worthwhile leadership can steer a company’s compliance structure to gain better results. This article explores the ways in which a company can satisfy financial regulators about fulfilling their compliance requirements effectively.
Approaches to AML Management
A number of different approaches are used for AML management by companies. One such approach is the silo approach where companies create separate and disconnected compliance departments to carry out risk analysis and detect anomalies in client data. There is a huge risk in operating compliance systems in silos as they tend to create misconceptions among departments as there is little to no communication between them. The cases involving banks like HSBC, Standard Chartered and ING faced substantial amounts in fines during the two year period 2012-2014 partially due to a lack of communication among departments. Even if an organisation uses high-end tech to implement compliance structures, a silo-based system will yield little to no results as the rest of the management has no idea of what is going on.
Another more effective approach is a fully integrated AML program. Such a program implements advanced tech tools along with sufficient human resources to build a cohesive AML management program. With the help of advanced FinTech solutions available for compliance including transaction monitoring software and AML screening checks at the time of customer onboarding. The monitoring systems use dynamic approaches to monitor client data and determine any weak points and suspicious activities. This gives the management team ample information to make relevant decisions and streamline their processes accordingly. It also allows them to delegate resources accordingly in high-risk areas.
AML Screenings are a part of enhanced due diligence of clients that is performed at the time of customer onboarding. They are used to screen a high-risk client’s name against global watchlists issued by financial regulators. AML screenings are usually provided by KYC/AML service providers that also provide customization for country wise AML compliance.
Effective Compliance Management
Effective compliance systems generally have a few key features. They have the potential to implement a holistic compliance structure across the entire organization. They use a capable team along with modern tech tools to execute AML regulations. Strong compliance management has the ability to delegate resources according to the risk level of a particular jurisdiction. It has a real-time monitoring and screening system that can detect any illicit activity as it happens. It should also have education and training programs to keep employees up to date with the latest compliance regulations.
Some of the AML compliance solutions available in the online marketplace focus on tracking transactions, their origins and targeted destinations. Most of the companies and regulators demand a strict screening of transactions that originate in third world countries as these countries have a large amount of financial criminals that want to launder money. Some of the politically exposed persons are also involved in money laundering activities while some other times terror financing is also carried out through these heap of transactions originating from different corners of the world and into the same bank accounts.
AML screening solutions with multiple functionalities are also available that allow for a diverse compliance adherence to banks and financial institutions. When it comes to the adaptability of these tech-based Anti Money Laundering solutions, Fintech industry take the lead over the conventional business categories such as banks, insurance companies, and financial institutions as they rely on the manual review process to track financial risk and transactions that threaten to bring on any regulatory oversight or the impending monetary fines.
Financial risk assessment and mitigation of financial fraud is something that can be performed with much more success and even more quickly with Automated AML screening solutions. In nearly real-time incoming customers can be vetted against their credentials through a huge data bank publically made available by regulators and financial law enforcement agencies via sanction lists and watchlists.
The regulators are also taking a more relaxed and flexible approach toward Regtech in general and AML Compliance solutions in particular. On the other hand, tech companies have also launched some exciting solutions and services to fully vet the financial risk profile of every incoming user and some have even gone above and beyond by ensuring that even during the customer life cycle, any emergence of financial risk is identified without any delay. So it is safe to assume that even if not directly, then indirectly by using AML compliance solutions you will be able to satisfy your regulators, regardless of your country of origin or specific business category.