Robust anti-money laundering (AML) and knowing your customer (KYC) capabilities have never been more important, nor the risks from lapses greater.
While global campaigns to crack down on money laundering and terrorism financing have been gathering pace for years, authorities’ focus is only set to intensify in the current climate. All financial institutions – from banks and advisors to investment managers (including private equity and hedge funds), trust companies and fund administrators – are in the spotlight. Any breaches or lax processes expose firms to heavy financial penalties and possible legal action. The reputational damage could prove even more costly.
Yet many institutions still struggle to meet all their responsibilities. Faced with an array of complex regulatory obligations that vary from country-to-country and change over time, that’s hardly a surprise – especially when firms’ AML/KYC and counter-terrorism financing (CTF) processes too often depend on manual intervention, and lack the rigour and sophistication needed in today’s world.
AML best practices
So what does a fit-for-purpose AML environment look like?
- Onboarding
Effective anti-money laundering starts at the outset of the relationship: with client onboarding. Nuances based on client circumstance and jurisdiction create onboarding complications that can best be addressed using a customisable, risk-based AML/KYC approach to create an efficient, accurate and scalable model.
Source of funds/wealth checks, along with advanced investor and beneficial owner screening – able to track complex, multi-level ownership structures to identify and verify underlying customer and beneficial ownership identities, and flag high-risk relationships – are crucial.
Document checklists, backed by automated emails to request missing customer documentation, help ensure all the required supporting information has been captured. Having a secure, centralised document repository will then allow static data and documents to be shared across regulations and jurisdictions to minimise duplication.
- Ongoing checks
Once clients have been onboarded, ongoing due diligence becomes a never-ending exercise with zero tolerance for error. Depending on the client’s risk profile, accounts must be reviewed periodically in line with mandated rules to ensure documents and data remain current. Any missing/expired documentation needs to be updated. Screening for sanctions and politically exposed persons (PEPs) should be automated and ongoing.
Real-time activity monitoring is vital to catch any trigger events and suspicious transactions, enabling potential issues to be dealt with before they breach user-defined parameters. That requires identification of AML risks, change of circumstance reporting and automated suspicious activity alerts across multiple scenarios, and account blocking if suspicious events occur.
- Offboarding
Efficient customer offboarding is often overlooked, but is a critical stage in AML compliance and the client lifecycle. Without automated tools, well-defined workflows and a controlled process, firms will find offboarding difficult to scale. Data controllers and processors will also struggle to comply with GDPR and other regulations.
The solution is a systematic data retention framework that alerts users when retention periods have been reached, can purge and mask targeted customer data in a controlled fashion, and track inactive or obsolete accounts. Capabilities need to be configurable to cope with different jurisdictional requirements. Monitoring jurisdictions’ data retention policies will be important as well to ensure firms stay up-to-date with current rules.
Along with these AML/KYC capabilities, legacy systems, case management systems and data feeds need to be integrated with the solution using APIs to ensure all relevant data can be caught and incorporated seamlessly. And by rolling up the end-to-end AML/KYC process flow into a centralised dashboard able to track and report on key data points and provide real-time analytics, institutions can get a ready view of every stage in the client lifecycle, with early warning flags of any compliance breach risks.
Too important to fail
AML/KYC compliance has become too mission-critical to leave to manual processes, ad hoc monitoring and siloed systems. The solution framework needs to be robust, efficient, auditable and integrated from end-to-end across the enterprise. Is your technology up to the task?
ABOUT DEEP POOL
At Deep Pool, we are dedicated to helping clients maximise their success. Deep Pool provides the industry-leading compliance software and deep consulting expertise financial institutions need to automate their end-to-end AML/KYC and FATCA/CRS reporting processes. Our team combines compliance experts, business analysts and software engineers to create a unique blend of industry know-how and experience, producing efficiencies, scalability and client servicing benefits that transform users’ businesses.
KURE, our flexible AML/KYC and FATCA/CRS reporting solution suite, supports all types of regulated financial firms, including banks, asset managers and service providers. Deep Pool is headquartered in Dublin, Ireland, with offices in the United States, the Cayman Islands and Slovakia. For more information, visit: www.deep-pool.com.