Roadmap to AML Efficiency: Once a financial institution’s AML programme is compliant with AML/TF regulations, how does it become efficient in meeting its obligations?
Over the last 15 years, financial institutions (FIs) have faced massive cultural and operational challenges responding to anti-money laundering and terrorist financing (AML/TF) regulations. FIs that failed to implement requirements in the timetable demanded by governments and regulators have faced significant fines, regulatory investigations and restrictions such as limitations on the onboarding of new clients for periods of time. Many FIs in well-developed regulatory environments now largely satisfy both their local and international-equivalent regulatory requirements following substantial investments in people, processes and technology. Among the core areas that have seen major investment are: the capture of “Know Your Customer” (KYC) documentation; the robust application of transaction monitoring controls; and the consistent screening of customers against sanctions and other watch lists.
In addition, front offices and operations functions have had to adapt to the cultural shift that “knowing your customer” must extend beyond narrow commercial value and into an acknowledgment that they “own” the ML/TF risks associated with each customer and the consequential systems and processes to identify, mitigate and manage such risks.
Many FIs have achieved regulatory compliance in these areas but at very significant cost, including experiencing commercially punitive degradations to levels of customer service and increased onboarding times due to the frequent requests for client data at multiple stages of the customer lifecycle.
In many cases, FIs have had to engage large numbers of temporary staff for multiple years to accomplish manual KYC remediations, and siloed system workarounds have been developed since integrated systematic solutions could not be developed and implemented quickly enough to meet regulatory expectations.
The challenge for many FIs now is how to make KYC and other AML/TF processes significantly more efficient and risk-based to deliver cost savings and customer service improvements while still meeting AML/TF regulatory obligations.
The paper below explores seven key areas of AML programmes, highlighted in the diagram, that institutions should focus on to achieve this goal of “Getting to Efficient.”
Seven key areas of AML programmes