In the superannuation and wealth management sector, the challenge of identifying and monitoring financial crimes will increase tremendously as these companies are growing bigger, faster and more global in the coming years. Thus, it is crucial for them to have effective and operational AML mechanisms in place to reduce potential risks. I’ve learnt from my previous working experiences that more and more companies in this sector are strategically attempting to align technological investments with business requirements to remain competitive. Some superannuation and wealth management companies I am working with are largely using Jade ThirdEye to generate alerts, monitor transactions, and automate AML reporting.
In my recent observations of AML practices, I believe it’s worthwhile to look at the factors superannuation and wealth management companies should consider when they define rules to monitor customers and transactions to identify risk.
The retirement age of 65 (in both New Zealand and Australia, depending on your preservation age) is a key time when the behaviour of a superannuation customer can be expected to change. This breaks the customers into three groups:
- A customer over retirement age who can use their account more like an investment account
- A customer approaching retirement age who may make large deposits knowing they will be able to withdraw funds in the near future
- All other customers who may make large deposits before withdrawing funds in special circumstances such as buying a first home or hardship claim
Example rules where Jade ThirdEye can help identify unusual behaviour within these groups:
- Deposits that are not aligned with a customer’s regular activity or profile, especially when nearing or over the retirement age point
- Large deposit or deposits followed by a withdrawal that is a large percentage of the recent deposits
- Dormant accounts that receive a large deposit or a large withdrawal
- Accounts opened and closed within a small timeframe
- Customers details changing, such as changing address multiple times in a few months
- Deposits from a non-nominated bank account, especially from an off-shore account
Investment and Commodities Monitoring
Jade ThirdEye can help identify potential money laundering in the investment and commodity advising industry in the following ways:
- Frequent deposits or withdrawals to/from accounts
- Rapid movement of funds into and out of an account
- Multiple deposits or withdrawals which could have been completed in one deposit or withdrawal
- Investment of funds from accounts of unrelated third parties
- Withdrawal of funds by transfers to unrelated accounts or high-risk jurisdictions
- Clients request custodial arrangements that allow them to remain anonymous
- A change in the customer’s geographic location, contact details or nominated bank account
Many of these can be avoided if a business sets rules around what accounts can deposit and withdraw funds.
Vulnerable Customers
What’s more, when thinking about wealth management we also need to think about vulnerable clients such as:
- Elderly investors who begin transacting in ways inconsistent with their usual behaviour may have been manipulated
- Minors may be used to hide beneficial ownership, tax avoidance and transacting on behalf of someone else
Additional example rules Jade ThirdEye can help with:
- Closer monitoring of customers you have deemed to be high risk or vulnerable
- Detecting a substantial change in a customer’s activity, for example, transacting significantly more than normal or increasing the value of their average transaction
- Frequent large deposits into minor’s account
As the cost rises for reporting entities to meet their obligations, flexible tools will become essential in allowing companies to respond quickly to changes in the regulatory landscape. A partnership approach with your solution provider with knowledge in your sector is crucial to ensuring a strong foundation when implanting and identifying areas for optimising the evolution of your solution
“The solution was tailored to our needs and manageable within a small financial crime team. Implementation support was impressive, with expert support and no push for going live till we were satisfied with testing as well as the ability for the system to perform it’s intended role.”, says the head of Enterprise Safeguarding & AML Compliance Officer from MLC Life Insurance.
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