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REGULATORS KEEPING PACE WITH FINANCIAL CRIMINALS’ MONEY LAUNDERING TECHNIQUES

James Saunders

Regulators are moving fast to keep up with the ever-evolving techniques financial criminals use to evade detection of money laundering and terrorist funding. In turn, compliance teams at financial institutions need to be agile to keep up with the rate of change in Anti-Money Laundering (AML) legislation and regulation.

The Financial Action Task Force’s (FATF) recommendations provide some welcome guidance, but compliance efforts are made even more complex by the nuances of regulations across different jurisdictions. Institutions that fail to fully comply with the rules and standards in every territory they operate in risk significant fines and severe reputational damage.

At the same time, many institutions are already struggling with the systems and people costs of complying with AML regulations. It’s time to consider accurate, adaptable AML measures based on RegTech solutions. Next-generation RegTech (Regulatory Technology) offerings enable institutions to reduce compliance costs and futureproof their anti-fincrime capabilities.

What’s changed?

RegTech isn’t just a buzzword. It’s an all-important defence mechanism against more intelligent financial criminals who exploit cracks in AML and Know Your Customer (KYC) processes and systems to disguise the movement of dirty money. Legacy due diligence and identity verification methods cannot deal with their tactics.

Even advanced facial biometrics can be surpassed using deepfake technology, while unregulated or underregulated assets such as cryptocurrencies have created fertile breeding grounds for scams, fraud cases and illicit proceeds. Dynamic RegTech platforms are not just addressing these issues but are flexible enough to address new fincrime techniques and risks as they arise.

An agile compliance framework that takes in every step, from onboarding through transaction monitoring and screening, is a proven way to compile thorough reports for regulators in ample time. Identities are checked, and payments are detected around the clock, no matter where or when.

Backed with modern RegTech, this approach shows a deep commitment to combating financial crime.

Human hands and eyes cannot keep pace with the volume of suspicious transactions. However, modern RegTech tools that leverage Artificial Intelligence (AI) for Perpetual KYC (pKYC) and constant transaction monitoring scanning can. The tech can constantly process data to find, raise, and investigate anomalies. Suspicious behaviours are discovered before they can do more potential damage.

Investing in human capital

With an integrated RegTech stack, AML efforts can be compiled into a single view. This gives compliance teams an upper hand, equipping them with the tools to smooth investigations and reduce the repeated manual tasks that stymied compliance efforts in the past. The technology is just the start, investing in human capital is also essential.

Compliance starts with a learning culture that enables compliance teams to keep up with the latest regulatory changes and fincrime trends. Investing in periodic AML training, education, scenario analysis, and impact assessments isn’t just about ticking boxes for the people team. It’s essential in making an organisation’s specific AML approach more effective.

A well-oiled machine made up of a RegTech platform and a compliance-first team is the antidote to costly and ineffective AML practices. Partnering with FinTech and RegTech experts – the creative minds pre-empting fincrime issues – is paramount to crafting adaptable, automated AML solutions that can grow alongside a business strategy.

RegTech democratises advanced fincrime battling techniques, benefitting every organisation’s responsibility to remain compliant, no matter what. Equipping platforms and people with the means to play a tactical long game against bad actors helps businesses to keep regulators happy and meet their responsibilities to society in curbing fincrime.

James Saunders, co-founder and CTO at RelyComply. He writes in his personal capacity.

INFO SUPPLIED.

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