It’s fair to say that 2020 was a year of two halves. This time last year and even partway into Q1, we were all gearing up for a big one: the economy was booming, retail was thriving, the sun was shining (in the Southern Hemisphere anyway). No one could have anticipated 2020 was the year that grown-ups would be educated on how to wash their hands. Equally, no one could have predicted the global adoption of masks either. However, the vigilant among us would have known that, regardless of what would unfold, the need to comply with AML regulations would never cease.
AML compliance: the show must go on
Regardless of what activity was planned for 2020 and how much was executed before lockdowns came into play, AML compliance was still needed. In fact, it was probably needed more than ever! For instance, government stimulus packages were prime targets for fraudulent activity, with criminals seeing them as new opportunities to generate and launder their illicit proceeds.
When the impact of COVID-19 was showing itself; we knew businesses would still need to comply and knew they were likely to do so under tougher conditions as in previous years.
Thankfully, most regulators gave reporting entities the ability to take risk-based approaches to their AML programmes. This wasn’t a licence to forgo compliance duties but do all they can in the circumstances to continue their fight against financial crime.
The impact of COVID from further afield
The UK Financial Conduct Authority published its annual report a few months back, which outlined many challenges, changes, and priorities they faced. Alarmingly, they were undertaking 65 AML investigations into misconduct of several reporting entities. Millions of pounds worth of fines had already been handed out. As they prefer prevention to persecution, the FCA are developing modules and tools to help test the robustness of a reporting entity’s AML programme. Similar tools would be invaluable for other jurisdictions around the world.
The FCA continue to emphasise the value of operational resilience. Tools such as Jade ThirdEye that help automate key processes are a great way to de-risk your day-to-day operations as if someone leaves or external disruptions happens, automated processes still occur.
Strong, robust compliance programmes require healthy governance and culture. Too often, compliance teams are mandated to tick all the boxes but are not given the tools and support needed to do their job as best they can. At the same time, AML programmes need to have a strong focus on customers and consumers too.
For instance, if technology is being used by customers to help firms be compliant, providing an excellent customer experience is essential. While such checks and balances are required, if CDD is painstaking for a customer, it reflects poorly on your business and the likelihood of repeat custom. So choose your technology vendors wisely!
A changing world requires changing transaction monitoring
From consumer behaviour to business operations, the disruption caused by COVID-19 was immense. Whether your transaction monitoring programme is automated or manual (or a mix of both), it’s likely that it will have needed tweaking throughout the past year. And as economies open back up, it’s also likely that the rules will need to be tweaked again.
Like any part of life, it’s worth reviewing your AML processes – this is how we’d recommend approaching a review of your transaction monitoring:
- Know your starting point.
- Map your rules to your risk analysis.
- Understand your data.
- Change one rule at a time.
- Be specific with your rules.
- Don’t expect everything to work on day one.
Much to the relief of many, 2020 is now over, but its impact remains. While it may not have been the year we thought it was going to be, it has been great to see so many businesses use COVID as an opportunity to invest in their processes and tools, and as a result, are now more resilient than before.
Yes, 2021 will have its own challenges, but as a partner who is dedicated to helping organisations protect their employees and communities from the harms of money laundering and the financing of terrorism, we’re looking forward to working with you to make the world a safer place.