The UK has long been regarded as one of the most regulated countries in the world when it comes to the financial services sector. Arguably much of this has been driven by membership of the EU, and the numerous money laundering directives we’ve adhered to over recent years. However, the UK will still be one of, if not the most strictly regulated countries even after Brexit – as the City of London needs to continue to be seen as beyond reproach as a financial institution.
Crises bring out the best in humans, and that has certainly been evident during the COVID-crisis, especially with banking, which has risen to the challenge more successfully than many expected. Sustaining the momentum post-pandemic will be critical, as economies struggle to recover. To remain robust and profitable, banks will need to pay particular attention to key areas such as transforming costs and reimagining customer relations, aided by talent and innovations.
Finding the perpetrators of crimes is a taxing task in terms of time and money; however, regulators require banks to comply with AML and KYC regulations or pay penalties. Data is key to uncovering the criminals who exploit banks for illicit purposes, but employing data to best advantage is easier said than done. Tools such as entity resolution and network analytics make the process much more trustworthy and less costly.
Compliance is a word that all companies, especially financial firms, need to know but is one that is not always enduring to boards and senior management. After assigning compliance officers the task of designing the compliance program, many executives lose interest and move on to more compelling concerns. But considering the potentially devastating risks to reputation and profitability of non-compliance, an effective compliance program requires continuous engagement, support and investment.
Rapid leaps forward in cross-border payments have led to significant reductions in processing times. This is great for customers but also leaves windows of opportunity open for cybercriminals, such as money launderers and fraudsters. The responsibility to remain compliant with financial-crime regulations weighs heavily on banks as it becomes more complicated, but the SWIFT network is going all out to help in the effort to ensure swift but legal transactions.
Financial institutions, coping with a tsunami of concerning issues, must face the reality of a more coordinated tidal wave of AML regulations, which regulatory regimes worldwide plan to enforce. The risks of disciplinary actions are too great for C-level and board members to ignore, so what developments do they need to know and what steps must they take to protect their companies, and themselves, from the consequences of compliance failure?
As technology continues to advance at a rapid pace, financial institutions all across the world are under intense pressure to improve efficiency, reduce costs and boost productivity. Indeed, there is now a considerable global need for the financial-services industry to evolve comprehensively from traditional, age-old business models.
It’s not easy to be stuck in the middle, a position that banks inhabit as they process the financial activities of others. Most transactions passing through their systems are honest, but some are illicit, often involving money laundering. Are banks innocent victims of criminals who exploit their processes or knowing participants in crimes? The case has not been tried, but public sentiment leans toward the latter. Can banks come clean?
The Continued Struggle with Anti-Money-Laundering Compliance: Ongoing challenges and opportunities for financial institutions
Money laundering is an unfortunate reality for banks with the potential to not only put them in hot water with regulators but destroy their reputations as sound, above-board financial institutions. Data and technology are essential to unmask those villainous customers who use their financial firms’ systems for illicit gain. What are the key areas that bank managers must consider when developing strategies to combat this insidious threat to their businesses?
The risks to banks and their executives from non-compliance with anti-money-laundering regulations are increasing dramatically. The United Nations estimates that as much as $2 trillion (5 percent) of global GDP is laundered. Since 2018, the exits of CEOs from Westpac, Swedbank and Danske Bank underscore the consequences. To effectively manage money-laundering risks, bank executives need to have sound answers from their compliance, security and IT professionals to five core questions.