AML Compliance: Where are we now and what does the future look like?

AML compliance efforts by banks and other financial institutions have rapidly expanded to adapt regulatory standards as quickly as possible. Large hiring drives, expansive training modules and hawk’s eye on changing policy are all instrumental in avoiding regulatory penalties.

To know how much further we need to go on the anti-money laundering front, it is important to take stock of the present situation and keep a watchful eye on future policies that may affect organizations. Here we discuss some geographies that continue to actively participate in regulating anti-money laundering efforts.

The American Chapter

  • Over the past year, AML and cyber-security have become increasingly connected with a strong emphasis on combating cyber-terrorism and money laundering through a uniform platform. This trend is expected to continue.
  • While most banks and prominent FIs are on the AML compliance bandwagon, there are many who are not yet aware of their responsibilities to AML. These typically include investments firms, lawyers, accountants, real estate agents and more.
  • Findings suggest that governments have been active in establishing and emphasizing AML laws. However, implementation is severely lacking on many fronts. Law enforcement will begin to rely on dedicated a task force to successfully regulate AML compliance.
  • There is also a clear lack of beneficial ownership information and subpar customer due diligence programs in place. With the deadline for implementation of CDD rule fast approaching, many FIs are working overtime to get their systems in place.

Europe’s Compliance Status

  • European counterparts face similar issues with their AML compliance efforts, but the effects are greater due to the EU – it can be both a boon or a bane.
  • The exclusive group (EU) makes it easy to share information across borders. Thus, beneficial ownership information is a little easier to come by. Additionally, an overall, comprehensive definition of beneficial ownership must be defined soon to ensure all states are on the same page.
  • Another indicator of poor enforcement is the lack of regularly published analytics on AML statistics. Through competent SAR and publishing comprehensive statistics in accordance to FATF guidelines, nations can improve harmony and comparability of AML efforts.
  • A study has found that there are varying degrees of compliance within the EU ranging from 85% to 32% compliance. The stark difference provides opportunity for fraudulent transactions to move across the EU unchecked.

The rest of the world

  • India
    AML efforts have always been strong with stringent foreign-exchange and KYC laws implemented over the last decade. However, current and future efforts rest with eradicating the ‘hawala’ system that works more as an informal, underground network.
  • Africa
    AML efforts in Africa are divided into two zones geographically, with each regulating body struggling to adapt and implement FATF guidelines for developing economies. The future will see a more focused approach to formalizing and regulating the Sub-Saharan economies, and the establishment of custom AML regulations.
  • Russia
    Russia has a pronounced and effective AML compliance framework. Official data from the Russian government clashes with reports from the US Department of Treasury on the efficacy of new efforts. However, one thing is for certain. Russia is increasingly targeting Cybercrime to curb money laundering and terrorism financing.

The final word

AML must be imposed on a global scale to effectively eradicate money laundering and terrorism financing. To best achieve compliance objectives, banks and other FIs must look to outsourcing and automating their AML programs with a trusted partner.