Every financial services provider in the world needs to take AML/CFT compliance seriously. For this reason, authorities update AML/ CFT standards to detect and prevent malevolent activities. Being a financial institution, it is your responsibility to know and adhere to the latest standards. In today’s era, regulatory tweaks in the world of AML/CFT are updated.
Over the past months, a number of standards have been revised and updated to reflect the continued bedevilment of the global economy by new and innovative financial crimes. You should be aware of all the recent changes made to the AML/ CFT laws and regulations.
The following is an outline of the steps you follow to be in current compliance. By following those recommendations, you can enhance your controls and mitigate the identified risks. This article will make sure you comply with new AML/ CFT regulations.
Know the Regulatory Environment
Knowing the AML/CFT standards is what your financial institution is required to meet. Learn as much as possible about the regulatory landscape and stay up to date with any updates. Check with your compliance officer on the new amendments on different topics.
Ensure all relevant members of your team know what they need to do to remain AML/ CFT issues. Make sure you are tackling all regulatory needs, and be especially aware in high-risk zones.
Conduct a Risk Assessment
Evaluate the potential threats to your company presented by money laundering and the funding of terrorists. Take stock of your procedures, clientele, and wares, and assign a risk rating to each. This will help you know what needs to be on your AML/ CFT monitoring and compliance radar.
It is essential to take into account factors such as your target audience, distribution channels, geographical spread, and any new financial crime developments. Record your findings and leverage the risk profile to bolster your controls and resource allocations.
Develop Internal Policies and Procedures for AML/CFT
Set up written internal policies and procedures to meet continual AML/ CFT compliance. Set out the customer onboarding, ongoing monitoring, record keeping, suspicious activity reporting, and staff training processes. Ensure alignment with applicable regulations.
Communicate the policies to all employees and conduct regular refresher sessions. Developing strong policies is the foundation of your AML/CFT program and helps provide a standardized approach to compliance throughout your entire business.
Implement Customer Due Diligence Processes
CDD policies and procedures should also cover the identification of clients and how they will be risk-rated. Shell companies with hidden owners are used in over 30% of financial crimes. Robust CDD reduces this risk. CDD continuous monitoring also extends to validating that transactions are normative relative to their known client profile. To stay in compliance, you should know everything about your client’s activities and account use, as well as the rules and guidelines for AML/CFT tracking.
Monitor Transactions and Flag Suspicious Activity
Create processes and procedures that will help monitor transactions based on the client’s risk rating. According to regulators, 49% of money laundering involved transactions of under $10,000 that had been structured to avoid detection. Leverage transaction thresholds and behavior analytics to identify anomalies.
Staff should be trained, based on your AML/ CFT policies, on the various types of unusual activities that have to be flagged for further review. Only just under 30% of the bigger banks state they have achieved full transaction monitoring automation, as you do need to plug any remaining gaps to catch more suspicious behavior.
Training Employees Effectively
Basic training ensures that employees are adequately informed of policies and can manage these risks the right way. Regular instruction will help to make sure that fresh AML/CFT rules or inquiries are well understood. More guidance is required to identify suspicious behavior in staff who are directly in contact with clients.
Auditing and Testing Compliance Program
Compliance programs need to be reviewed regularly to make sure they are working. Both internal audits and external audits are desired. This audit includes transaction sampling, policy reviews, and staff interviews to determine if AML/CFT policies and AML regulations are being followed.
These are the types of test transaction attempts that can expose control gaps when prohibited parties are present. Resolution of audit findings fortifies future oversight efforts.
Technology Solutions for Enhanced Compliance
By automating manual processes, efficiency is increased, and best practices are standardized across branches. Artificial intelligence-based solutions have become necessary, as they help check transactions way beyond what is possible, filtering the transactions into suspicious transactions. This aids in compliance with AML/CFT rules and laws and provides monitoring for all accounts and transactions. Utilizing biometrics, machine learning, and blockchain, amongst other technologies, helps to cope with the larger volumes and new complexities present in financial services while abiding by these regulations on an ongoing basis.
