Bradley Elliot, CEO at RelyComply
Regulated Financial Institutions (FIs) are a bulwark against financial crimes such as money laundering, tax evasion and terrorist financing. With around 2 to 5% of global GDP laundered annually, FIs are under enormous pressure to comply with stringent Anti-Money Laundering (AML) regulations.
This begins with implementing a robust AML programme built on global best practices and a modern Regulatory Technology (RegTech) stack. Here are some of the critical steps an FI’s professional compliance team can follow to fortify their organisation’s AML programme now and for the future:
1. Conduct thorough risk assessments.
FIs should follow a standardised approach to assessing AML risks among individuals and organisations they deal with. By understanding specific risks, FIs can adjust thresholds for certain entities within their AML programme and respond more effectively to the threats they encounter most often.
- Everyone the FI onboards as a client must be assessed. Risky customers include those on international watchlists, sanctioned persons, Politically Exposed Persons (PEPs) and people and organisations operating in high-risk jurisdictions.
- Transactions (including digital assets) should be monitored for anomalies. Frequent passing of large amounts or sums should be investigated.
- Suspicious geographies need to be monitored more carefully. These include those with high rates of financial crime and corruption or weak AML processes.
- Trading some financial products is riskier than others, as are some industries, including private banking.
2. Understand your customers better
Customer Due Diligence (CDD) involves collating and verifying the information gathered for each onboarded client. After assessing the individual cases above, screening their information against trusted watchlists and drawing on adverse media can identify further risks. If exposed or found operating in embargoed jurisdictions, they should be raised for Enhanced Due Diligence (EDD) for a thorough investigation.
3. Monitor people and payments around the clock
AML should move beyond manual processes that slow down workflows and cause upticks in false alerts (flags that cause investigations into low—or no-risk entities). Most (95%) of AML should be automated and react to user-set risks during risk assessments and due diligence protocols. A 24-hour monitoring and screening should be up-to-date about risky people and transactions and highlight activities for analysts to check further.
4. Make reporting accurate and consistent
Reporting anomalous behaviours is mandatory for AML. Suspicious Activity Reports (SARs) must be submitted promptly to relevant authorities. This is made easier through real-time risk alerts, shared customer data in an AML system, and well-managed investigations into raised individuals or transactions.
5. Invest in agile solutions
RegTech offers more centralised, cost-effective ways to conduct AML processes, integrating with existing systems to be futureproof in changing regulations. Plus, customer screening and transaction monitoring can be strengthened using Artificial Intelligence (AI):
- Accurate processing can summarise, contextualise and segment unstructured data in seconds.
- AI can surface risk automatically at any time for further investigation.
6. Audit internally and externally
Maintaining clean data with a single view of the customer is critical. It provides accurate, accessible and transparent evidence for a digital audit. An FI’s employees and AML system must be routinely investigated internally, ensuring everyone understands their responsibility in reporting suspicious activity. External audits provide specific recommendations to close gaps in AML processes and systems.
7. Foster a transparent compliance culture
AML programmes are multifaceted, but no stage should be left unchecked. A combination of compliance expertise, documented protocols, company-wide culture, and RegTech advancements strengthens the fight against financial crime while extending beyond basic regulatory requirements.
Safeguarding your business’s reputation
With the right processes, systems and people in place, an FI can meet compliance obligations in a structured and cost-effective manner. This, in turn, will safeguard the business’s reputation, avoid the risk of regulatory fines or penalties, build customer trust, and help protect the broader economy from the threats of fincrime.
ENDS
