Money Laundering & Co.
Stricter requirements for prevention systems
Issues surrounding customer-related compliance in the banking business are not losing their relevance. On the contrary, the financial supervisory authority has been strengthening its money laundering prevention capacities for some time now. On the one hand, this is a reaction to the increasing explosiveness and frequency of incidents. On the other hand, pressure from transnational bodies and committees is having an impact. Within Europe, measures are being harmonized and tightened in equal measure.
In the future, the new Central European Anti-Money Laundering Authority "AMLA" will coordinate national authorities to ensure that the private sector applies EU regulations correctly and uniformly. Investments are being made to improve analytical capacities to identify illegal financial flows and combat them. Combined with the other comprehensive regulatory measures at European level, a bulwark against money laundering and terrorist financing is being created. The tightening of rules on the collection of data on beneficial owners and the new design of the European Money Transfer Regulation are just two examples. But what does the increasing tightening of control and reporting requirements mean for financial service providers in concrete terms?
Banks are obligated parties in the fight against money laundering
Banks, by virtue of their business model, are often at the source of the relevant information that feeds the AML machinery. They are obligated parties that, through their prevention systems, must contribute to preventing or at least impeding the entry of illicit money flows into the legal financial and economic circuit. The more comprehensive and the more specific the information on persons and transactions can be collected, the greater the accuracy of the search for reportable incidents.
One challenge is to adapt the prevention systems used to the business and risk structures. On the one hand, you don't want to break a butterfly on a wheel, but on the other hand, you definitely want to be prepared - for current requirements and future expansions. And of course, the "good customer" remains the focus of interest. The service is tailored to them, from the first contact to the long-term continuation of the customer relationship. The "black sheep" are to be sorted out as inconspicuously as possible.
Know your customer
In terms of the digital banking process, this means (getting to) know and analyze customers without ever seeing them. And providing them with a trouble-free onboarding experience in the process. No one wants to risk a smooth application process being interrupted or dragged out by screenings running in the background. This can only be achieved with fully integrated and highly scalable KYC modules that have real-time connectivity to all relevant sanctions lists. The retrieval of daily updated sanctions and embargo lists must take place in fractions of a second.
Supervision looks at aspects of effectiveness and efficiency when evaluating prevention systems. These concern the functioning of the systems themselves as well as the supply of the same with the correct data. The performance of the systems is relevant for the assessment. Especially for large-volume business models, the screening processes online and in batch can be a challenge for the inventory screenings. On the content side, the question is whether the system reliably generates the required alerts with a reasonable number of hits and a reasonable number of false alarms. A prerequisite for this is the effectiveness of the scorecards set in the system, which should be tailored to the bank's risk profile and readiness.
Advanced prevention systems ensure high hit accuracy and flexible parameterization options, and also offer convenient and audit-compliant processing procedures for the compliance department. Because not only customers, but also employees have expectations. Software should be intuitive to use and streamline processes.
Understand your system
An important finding, then, is that the quality of prevention systems goes hand in hand with the understanding as well as the acceptance of those who configure and use them. Careful setup at launch, conscientious testing, and ongoing calibration are success factors, as are the timeliness and relevance of the data supply, which is ensured via the list providers. Intelligent and efficient applications are required that grow with the requirements of the financial institutions.
The continuous work of the individual institutions results in increasing transparency about the standards and procedures, which benefits all market participants.