AML Compliance: The Big Picture

Compliance is a dynamic function of financial institutions, due to the changing regulations that govern these programs. But features like KYC and CDD should extend beyond large organizations. Any company that deals with money needs to understand the crucial impact it has as a node in the global network.

With criminals seeking any path to inject dirty money into the system, every institution needs to beware of who their customers are.

The path to a true risk-based approach

KYC has been around for a while, but it followed a checkbox approach as opposed to the comprehensive methods in place today. The PATRIOT Act set into motion an avalanche of regulatory requirements that ended in making KYC and CDD compliance mandatory. Although these policies were in the works well before the terrorist attack on 9/11, the event passed this specific piece of legislation quite quickly.

Know Your Customer – inside and out

While CDD is not a direct mandate passed by lawmakers, it follows as a result of Suspicious Activity Reporting requirements.

Collecting information about customers isn’t as simple as getting them to fill out a questionnaire. Sometimes, clients are unwilling to divulge all information as data breaches and other digital hacks might leave them feeling vulnerable.

However, the company must be prepared to take initiative in finding the information that isn’t directly provided to them. This can lead to a severe drain in resources. Although, working with an established partner can greatly simplify the task.

At Allsec, we create a complete digital profile of the customer using third party sources such as LexisNexis and negative news alerts. Based on this information, customers can be categorized into risk pools. Process requirements also involve closely watching high-risk individuals and monitoring them more frequently.

Speeding up the process

Machine learning and other technological advancements add tremendous value to compliance programs. For example, Allsec’s automation based solution uses a decision engine to accelerate compliance. Leveraging technology means greater efficiency and lesser chance of human error creeping into results.

Similarly, since most FIs find recruiting and training the right talent to be pain points, we’ve developed an in-house training program that equips promising individuals with the right set of tools to work on AML compliance. While some FIs prefer to work on software they are familiar with, the underlying principles of AML compliance remain the same thereby allowing trained agents to perform flawlessly in any environment.