AML compliance struggles and how companies can overcome them
A recent survey into anti-money laundering (AML) has found that 60% of companies are struggling with staying ahead of AML regulatory changes and ensuring effective compliance. Simon Luke from First AML outlines four key reasons for these AML struggles and how compliance teams can overcome them.
Lack of resources
Within any business department or strategy, achieving goals and carrying out tasks effectively depends on what resources you have. Resources can span multiple areas, range from the human, financial and physical, to the intellectual, emotional and digital.
When it comes to anti-money laundering compliance and conducting know your customer (KYC) checks, these are necessary business steps that can often fall outside of business resources.
Conducting proper AML due diligence takes an inordinate amount of time, spanning multiple people, departments and tallying up significant operational and opportunity costs. And with AML regulations regularly being re-evaluated and updated, it’s not a surprise that many organisations don’t have the expertise to fully understand compliance measures and whether their processes are correct.
This is even more pronounced when it comes to understanding complex entities and networks of funds transactions.
As one solution, companies can consider outsourcing their AML processes, with a dedicated team of compliance professionals on hand to provide support. By adding to the resource pool in this way, it gives businesses peace of mind and more time to focus on other strategic objectives.
Complexity
Individual cases can often be easier to handle. But when it comes to more complex, opaque entity structures with multiple layers of ownership and shareholding, alongside various accounts domiciled in tax havens, the know your business (KYB) and know your customer process becomes that much harder.
Knowledge is of course key here. Employees need to have the relevant training and experience to build a culture of compliance, including understanding common money laundering signs and red flags.
In order to overcome resourcing and time constraints in tackling the complex, companies can leverage external experts and technological support to carry out training and create robust AML compliance processes. AML technology can be embedded with the necessary intelligence and expertise provided by AML specialists to break down dense documents in complex cases, including producing entity structure visualisations and leveraging international data sources.
Technology limitations
The phrase ‘AML technology’ covers a wide range of software platforms with different workflow capabilities. Yet a ‘Frankenstein’s monster’ of AML systems is being created, with the rise of more and more point solutions – designed to manage specialist areas – now being patched together to form an overall (disjointed) AML workflow. This is becoming unmanageable and sucks out too much time for compliance professionals moving between each system.
Some technology suppliers, however, are dramatically improving workflows through creating a single system that can tackle the whole AML process. Rather than patching together different systems, companies can harness an external SaaS provider to implement a platform that reduces compliance noise by housing all relevant information in one portal.
In terms of resourcefulness, this can alleviate manual tasks and therefore accelerate processes, foster greater collaboration and transparency, and deliver company-wider consistency.
Further reading: New technology platform cuts operational KYC costs 40%.
Regulatory changes
Dirty money travels far and wide. The more entities it goes through, the more countries it crosses, the easier it is to hide money and the owners involved. Each country can have its own regulations on AML. Regulations are also updated consistently in response to new money laundering methods and innovations, such as cleaning cash with cryptocurrencies. This can make it increasingly hard to maintain compliant processes, systems and training.
Some countries, as now guided by the EU’s changes to public register access rules, may restrict access to ultimate beneficial ownership (UBO) registers in their entirety. Without access, how can you effectively check the UBOs of companies? In these situations, compliance professionals can find other sources of information, such as shareholding registers and beneficial ownership charts to create maps of ownership levels.
But the process of manually staying on top of changing rules and collecting information – especially for complex cases – can eat into valuable time and resources. It’s why technology, again, is so important. An AML platform can update as regulations change, making sure that business workflows keep compliant.
The bottom line
Companies are aware of their own AML challenges – it’s just knowing what they are specifically and how to overcome them. A lack of resources combined with complex cases, inefficient technology systems and grappling with changing regulations creates a labyrinth of AML obstacles.
The consultancy industry holds a great position here. They can offer AML compliance support and advise clients on the various ways of addressing these obstacles, such as what tools they can use to unpack complex cases and how best to implement technology.
Through harnessing external expert support and implementing a centralised AML platform, for example, consulting firms can create efficient AML workflows that help maintain compliance, optimise resources and flex with regulations. It’s a complex world, but the solutions are out there to make it that much simpler.
