Increasing regulatory enforcement, legislation and geopolitical changes, record-setting monetary fines make adequate AML and sanctions risk management a significant challenge for financial institutions. Norton Rose Fulbright’s survey reveals how FIs are confronting AML and sanctions compliance and suggests steps to improve their tactics.
Financial Action Task Force (FATF)
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.
India’s banking system has been plagued by shadow banking since the 1990s, when non-banking financial companies sprouted up and grew, creating a financial crisis that is as unique as the country itself. NBFCs perform the same functions as traditional banks but under the radar of regulation, creating the potential for disruption. Recent failures of NBFCs that have spread to the broader economy have prompted regulators to adopt a stricter stance.
Financial Institutions are often deliberate targets and unwitting participants in crimes, from money laundering to market manipulation. A relatively recent addition is Green Crime, which includes transgressions against the planet’s natural resources, such as environmental and wildlife crime. Fortunately, Refinitiv’s recent survey results show that the majority of those surveyed want to end ecocide atrocities such as illegal wildlife trafficking, recognizing the risks to not only to the health of the environment but also the financial system.
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?
The mandate of financial institutions is to process financial transactions for individuals and businesses, but unfortunately, these institutions are sometimes used for illicit purposes, such as money laundering and terrorist financing. Effective, accurate risk assessment is the foundation of a financial firm’s risk management and regulatory compliance, and there are a number of manual and automated methods available to assess risks. Detecting and acting against suspicious activities is a must for banks today.