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Anti-money laundering and financial crime: Challenges in 2016

Authored by: Synechron Technology Group

With speakers from global tier-1 banks, the European council, the US OFAC and a large number of industry experts, the annual ACAMS Anti-money Laundering & Financial Crime seminar proved a fascinating one.

Synechron Business Consulting, with representation from both its Amsterdam and London offies, joined the discussion both days and took the following key takeaways:

AML4D UBO challenges
Ultimate Beneficiary Owner definition and identifcation challenges remain key attention points in the next AML directive, AML4D. Intensified by recent examples such as the Panama Papers, there will be an even bigger global sense of urgency to tackle UBO definitions.

The fact remains that no clear solution is provided yet some scepticism even surfaced during the seminar with regards to the central UBO register. How reliable will the data be? Will it be yet another source of information that needs validating? How to handle the expanded definition of PEP? Can financial institutions walk on the risk-based assessment road when assessing their business with PEPs? All relevant questions that will need to be addressed during the process of implementation (or ideally, before).

Flexible risk assessments, the ability to deal with the fast-paced changes in the regulatory landscape and the requirement of proactive sanction management - they all call for a fit-for-purpose business strategy and a truly agile business.

Technology is no silver bullet
With the ever growing volume of data in the world of KYC and CDD, data analytics and data processing are truly becoming the cornerstone of every FI's Client Lifecycle Management department. Front runners in KYC and AML analytics have already proven that big data is a necessity for future proofing one's CLM processes. Adoption of technology, however, whilst essential, is far from an all exhaustive silver bullet. There was an overall consensus that the right resources, a fit-for-purpose operating model and solutions remain essential to ensure a successful integration with business as well as a future proof design.

Flexible mindset to risk & de-risking
Financial institutions are familiar with the concept of a risk-based approach and apply the methodology as prescribed by most governing bodies. Applying the right risk appetite to the right part of your own business, however, rather than just focusing on the type of client, is something not many FIs have made themselves accustomed to yet. The concept of a single risk appetite for an entire FI appears to be a thing of the past.

Something that was widely acknowledged in the main panels during the seminar: multiple representatives of tier-1 banks explained it is no longer feasible to offer all products, to all clients, in all regions. The difficult part is assessing which regions, products or clients are eligible for de-risking. Differences between group-wide and regional risk appetite, interpretation of client and product risk (in contrast to credit limits for instance), relation between client revenue and risk appetite all bring variables which add to the challenge.

To have complete control over the de-risking process, it is of the utmost importance to have a proper client off-boarding process in place: one that can be applied to all clients and product categories, or at the least can adapt to fit different client portfolios the FI serves.


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