Money laundering compliance regulations have been in place for as long as financial crimes have existed. The financial sector is primarily at the sentinel point of money laundering and fraudulent activities. Therefore, they tend to have a higher responsibility towards protecting their business and customers from it. For years now they have tried to put in place Know Your Customer or anti-money laundering or AML compliance policies that can help them do so. But as the technology advances, criminals find better ways to breach existing protocols. This makes the existing methods used by banks and financial institutes futile.
Flaws in Present Compliance Systems
One major flaw in the current compliance methods adopted by businesses is that they are inconsistent. Every institute wishes to fulfil the bare minimum of regulation requirements without realising the consequences the flaws in their system could have. Accordingly, this has led to each bank and financial institution asking for different documents for verification. Some may ask for passports and driver’s licences, others may need your ID card and utility bills (for address verification). This has led to higher friction in business processes that result in lower customer satisfaction rates.
Monetary Detriments for Poor Compliance
One major blow that banks often face due to noncompliance or even poor compliance procedures is heavy fines from regulatory bodies. These penalties can often reach millions of dollars. For instance, in September of 2018, a Dutch Bank named ING was charged a penalty of 900 million dollars. Accordingly, the figure for global fines imposed on financial institutes for not adhering to compliance led to a total of 14 billion dollars in damages.
Better Compliance leads to Increased Profits
Banks that have been quick in adopting smarter and digital AML compliance solutions have seen a smoother customer onboarding process. This has led to an increase in their revenues and has helped them achieve improved customer satisfaction
Benchmarks for AML Compliance
Some practices that banks and financial institutes can implement to achieve better compliance measures include:
- Banks should constantly keep themselves updated on anti money laundering compliance regulations. This can help them establish a better compliance process that reduces or even eliminates the threat of financial crimes.
- Implementing digital AML solutions can be the key to establishing sound compliance measures. Many systems and software are available that can detect and prevent fraudulent activities even before they happen.
- It is better to require the client’s presence if they have a high profile, during the client onboarding process.
- If you are willing to take on a Politically Exposed Personality (PEP) make sure you put them in a high-risk level program and keep them aware of their status.
- Keep on performing AML checks on your existing clients regularly in order to keep updated on their risk status.
Digital AML compliance solutions may be the best thing for adhering to global anti money laundering compliance regulations. They can not only help banks to prevent fraud and financial crimes but help them avoid hefty fines imposed by global regulatory authorities.
For more information please visit here.