Technology enhanced AML/CFT compliance

Published by: Asia Pacific AML

Enhancements in technology have compelled meaningful change to personal and business activities. With increased access to mobile technology, through to the prominence of driverless vehicles, technology is influencing the way we manage our relationships, communicate, and undertake once mundane activities. In more recent years, technology has also begun to significantly influence how businesses manage their obligations with meeting compliance laws for anti-money laundering and countering financing of terrorism (AML/CFT). This influence is not just associated with the large financial institutions, but also small and medium sized entities (SMEs).

The compliance laws of AML/CFT are based on meeting objectives where all businesses must meet the outcomes, regardless of size. Having the same expectation is now adding pressure on SMEs who lack not only inhouse expertise to begin the compliance process, but also operate with limited resourcing in available staff to take on the role of an AML Compliance Officer. If businesses fail to meet the required compliance standard, large fines can be ordered – putting most SMEs out of business.

In the past, banks have become accustomed to reporting and being monitored closely by government departments. As AML/CFT compliance has increased to include new businesses and professions including; casinos, money exchange, foreign exchange trading, money remittance, lawyers, accountants, and real estate agents, for many SME’s, being closely scrutinized by supervisory authorities, the experience can be extremely daunting.

So, what is the solution?

There is no doubt that today, technology is transforming the AML/CFT compliance scene. Typically the sector is characterised by either AML RegTech (Regulatory Technology) or AML SupTech (Supervisory Technology). AML RegTech is largely about finding solutions for SMEs to meet their regulatory obligations whilst AML SupTech provides automated processes to simplify oversight across sectors which have varying levels of complexity.

Active users of AML RegTech and AML SupTech are moving away from labour intensive, unintegrated, ‘tick-box’ processes – towards automated, real-time, integrated, and ‘smart’ data. AML RegTech and AML SupTech can interpret enormous quantities of data in a visually attractive display – in an instant – making it attractive to supporting, enhancing, and delivering AML/CFT compliance. International AML/CFT standards set by the Financial Action Task Force can also be standardised, simplified, and prioritised using RegTech and SupTech solutions.

Where a business would once struggle to meet AML/CFT requirements for client onboarding, AML RegTech solutions now provide seamless and efficient processes for the client as well as the business. Furthermore, AML RegTech can effortlessly automate policy requirements into the compliance framework, replace manual processes, identify red flags, and mitigate human error.

The motivation for increased development and promotion of AML RegTech and AML SupTech is being driven by those who have seen an opportunity to create solutions for meeting regulatory objectives in existing policies, procedures, and control mechanisms associated with AML/CFT compliance.

Other drivers more openly discussed by advocates of AML RegTech and AML SupTech include the ability to overcome increased complexities in regulatory reporting. This includes the benefits attributed to saving costs on human resourcing and the consolidation of business activities. Not forgetting the need to contain burgeoning rising legal and reputational risks for fines of non-compliance.

Nevertheless, there is still hesitation as to the widespread adoption of RegTech and SupTech solutions. However, hesitations are decreasing as governments across the globe are realising the value in using technology to efficiently meet AML/CFT compliance objectives. Seemingly, it is the AML regulatory bodies in the UK and Australia which are leading the charge by embracing AML RegTech and AML SupTech and actively promoting closer collaboration between developers and businesses subject to AML/CFT regulations.

In 2019 and beyond, AML RegTech and AML SupTech will gain further traction, not just because of the support being given by regulators across the globe, but through the willingness of regulators to work side by side with businesses and reporting sectors. This momentum will no doubt be enhanced by the need from businesses and reporting entities to equally increase efficiency and effectiveness. At the same time, businesses  will be seeking to further reduce compliance costs – expected to be through the adoption of simple solutions that traverse the entire AML/CFT compliance framework.

ABOUT THE AUTHOR: * Dr Nicholas Gilmour is an Executive Consultant at AML360 and frequent author on diverse topics relating to AML/CFT compliance – including the use of RegTech and SupTech solutions to support industry and national supervisory authorities. Having worked with businesses around the world, Nicholas is passionate about strengthening AML/CFT controls to increase safety and wellbeing for all. In March 2019 he moderated a group discussion at the Central Banking FinTech and RegTech Global Supervisory Summit in London.