AML regulators receive flak from both sides of the aisle – those claiming they don’t do enough to deter money laundering, and financial institutions under pressure to step up their compliance because the ask is too great. While we won’t argue the merits and demerits of either side, there is an understanding that at the end of the day, their word is the law, and the cost of non-compliance too great.
From the perspective of FIs, compliance programs need to adhere to a set of guidelines, and their processes have to be foolproof in the face of any audit. Unfortunately, where most go wrong is in trying to create a comprehensive plan, that fails to be flexible and adaptive to dynamic compliance.
When old dogs learn new tricks
Speaking of dynamism, criminals are adept at taking advantage of loopholes in any system. It’s one of the foremost reasons for evolving regulations. More often than not, illicit transactions don’t always take on a novel disguise, but only slightly depart from the modus operandi to simply slip under the parameters established by the organization.
Thus, it begs the question, what more can an institution do to safeguard their business (short of de-risking)?
Call in the experts
A shift in the approach to AML can do more than just bridge the gap between non-compliance and a compliance program. With continuous risk assessment, and a deeper understanding of patterns, AML consulting can create new opportunities for business development.
In any case, you can never go wrong with an extra set of eyes. Especially, those trained to spot compliance trends, and preempt solutions. For example, the CDD deadline, that was slated for May 2018, introduced heavy cost implications for many FIs rushing to get their paperwork in order. However, that did little to lessen the impact of false positives on the system.
Moving beyond simple compliance
Delving deeper into organization-wide compliance, it is clear that it takes more than AML solutions to mitigate risk. Overall stability is only possible when such programs are implemented in conjunction with governance, risk, and enterprise compliance management.
Since most compliance approaches are siloed, it is essential to leverage expertise at a higher level, for a better understanding of business risk, how they integrate into different functions, and how to mitigate the same.