With the EU Fourth Anti-money-laundering (AML) directive casting a long shadow over the regulatory landscape, delegates at the recent ACAMS AML and Financial Crime conference in London were understandably hungry for guidance and inspiration from an impressive array of speakers on tackling compliance complexities, achieving efficiency gains and balancing risk-appetites successfully.
Out of the numerous issues addressed at the event, delegate feedback and conference room buzz led us to clearly identify our top five hot takeaways.
- Challenges surrounding beneficial ownership (BO)
- Challenges surrounding politically exposed persons (PEP)
- Technology - its potential and pitfalls
- Due diligence efficiency – how to achieve it?
- The remediation cycle – how to end it?
It is not much of a surprise that beneficial ownership (the strongest area of focus according to a conference poll) followed by politically exposed persons were the top concerns of the day. The main worry over BO was not on definition and scope, but on issues around data capture and enforcement. Despite the creation of central registries (subject to individual governmental participation), the Directive is clear that obliged entities may not rely exclusively on information held. The challenge, therefore, of identifying complex tax avoidance structures such as tax havens and cross-border linkages simply add to the complexity of data capture and timely accurate analysis. However, a much anticipated expanded definition of PEP is a daunting prospect for institutions already faced with screening thousands of individuals. This represents a significant operational challenge. The definition of ‘reasonable measures’ offers little comfort.
Delegates were therefore understandably interested in how the latest suite of FinTech solutions – particularly business intelligence and data analytics software - could help them meet regulatory requirements, whilst improving efficiency, visibility and cost-savings. However, as most FinTech companies are relatively new, there was uncertainty around who could best be trusted; reliability, ease of implementation and integration as well as future-proofing against changes to anti-money laundering programmes were all burning issues.
That said, software was definitely identified as key to improving another area of concern - due diligence efficiency. Process automation was highlighted as vital, since it releases the manpower to concentrate on compliance ‘stress points’ that require enhanced due diligence. This, and the adoption of a risk-based approach, were promoted as essential to achieving best practice.
The final issue getting compliance and risk professionals hot under the collar was ending the costly ‘know your customer’ (KYC) remediation cycle and driving onboarding efficiencies. With the guiding principle ‘remediate risk, not files’, organisations are being advised to be more proactive in reviewing client
Given that another amendment to the EU Fourth AML Directive is imminent, the concerns highlighted are not going to go away. Increased exposure to reputational risk (consider the recent fall out from the publication of the ‘Panama Papers’) is a very real concern. But the solutions are out there. Being able to adapt and embrace change is needed for organisations to face the challenges head on.