Your people, your processes
Our survey respondents said that hiring experienced staff is the most significant challenge they face in the AML arena, tied at 19% with concerns on the pace of regulatory change. Unfortunately, the supply of talent continues to fall behind demand. Churn among AML and compliance staff is high, and competition for top-shelf people is significant for both financial services and non-financial services companies.
Right people, right skills, right places. What skills do you need?
When your best line of AML defence is having the right people in the right roles with the right skills, you need to know what you are looking for. There’s significant demand for specialised expertise and skills around:
• Global standards and requirements
• Jurisdictional regulations and obligations
• The global regulatory ecosystem
• Customer due diligence
• Technical expertise in transaction monitoring
• Data analytics
Risk assessments are critical
Over the last decade, increased money laundering control measures in the formal financial systems have forced criminals to seek new ways to “move” the proceeds of their crime. That’s why regular risk assessment is crucial. It’s a tool that enables your organisation to identify and address the money laundering and terrorist financing risks you face – wherever and with whomever you do business.
Risk assessments should be conducted on a periodic basis, and should be closely attuned to changed circumstances such as the operating environment, global standards and regulation in countries of operation. The risk assessment includes the profiling of customers into different money laundering and terrorist financing risk categories. It is also the global standard recommended by FATF and regulators to curb threats. It enables organisations to:
• Identify and measure higher-risk areas
• Develop frameworks and processes to help mitigate the risks
• Apply appropriate control measures, oversight and resources to areas of higher risk
Despite these clear advantages, more than a quarter of the financial services firms that participated in this survey either are not currently conducting an AML/CFT risk assessment across their global business footprint, or don’t know if they are.
Know your customer, today and tomorrow
Knowing your customer today means going beyond identifying and verifying the information they provide. It must be a dynamic act, not a static one. It is essential to keep monitoring for red flags and suspicious activity on a regular basis. Special attention should be paid to clients’ business relationships and transactions – especially when they conduct business with persons residing in countries with weak or insufficient AML regulations.
Financial institutions seem to be stuck in a bind. Most are facing the challenges of “rightsizing” their AML programmes for their changing business in an evolving global regulatory landscape. Yet many are hampered by legacy monitoring systems that are proving to be burdensome and extremely expensive to tune, validate and maintain.
Unfortunately, the cost and complexity of implementing some of the new, more sophisticated data-analytical platforms – leading-edge algorithms which could help them move from a cumbersome transactional basis to a more strategic and efficient approach – is likely prohibitive to many.
Our respondents seem to be well aware of the challenges of their systems, with data quality cited by one in three as the most significant technical challenge they face.
AML alert monitoring, too, is performing poorly. Only half of identified suspicious money laundering or terrorism financing is getting flagged by transaction-monitoring systems. Current AML typologies might not be catching the nuances and complex structures necessary to identify high-risk transactions.