The compliance evolution - with Bottomline

We sat down with William Brown from Bottomline and discussed the actions companies need to take to combat money laundering and terrorist financing trends

Despite what technology vendors or the media might have told you, Artificial Intelligence technology is not the silver bullet for ensuring Anti-Money Laundering (AML) compliance and risk mitigation. In truth, a successful AML compliance programme requires a mixture of the following to implement a credible risk-based approach:

• Adequately trained staff;

• Adaptable technology;

• Formalised processes;

• Pertinent data;

• Timely management reporting.

Aligned payments and compliance

Digital payments technology, now considered the foundation of most Financial Institutions and Corporates worldwide, enables them to quickly and effectively process high volumes of multi-transaction types, both domestically and internationally. Unfortunately, the downside is that unscrupulous individuals, gangs and networks are always seeking new ways to launder their ill-gotten gains. This dark underworld increases the pressure upon Money Laundering Reporting Officers (MLROs) and Compliance Officers to ensure their AML compliance programs are effective enough to continually evolve to combat the latest money laundering and terrorist financing trends.  

Compliance evolution

From inception, international AML regulations have remained transient, continually evolving to combat money laundering and terrorist financing globally. In recent years, it’s been noticeable that the frequency of regulatory changes is rising, as is the focus upon making businesses and persons in the position of power more accountable for AML compliance breaches, money-laundering and terrorist financing activities.

Recent regulatory changes include the EU AMLD6 and the US Anti-Money Laundering Act (AMLA). The AMLD6 lists 22 predicate offences (defined as ‘criminal activities’), including terrorism, human trafficking and migrant smuggling, illegal arms dealing, and counterfeiting products. 

The AMLA is the most significant change in US regulation since the introduction of the PATRIOT ACT in 2001 and stipulates adherence to the following:

• Explicit coverage of digital assets;

• AML staff must be located in the US;

• The burden is on Financial Institutions to identify their customers’ Beneficial Owners, as per the FINCEN (U.S. Financial Intelligence Unit) Customer Due Diligence rule;

• Whistle-blower programme;

• Penalty increases for violations involving international money laundering under US legislation via the Bank Secrecy Act (BSA);

• Streamlined Suspicious Activity Reports and Currency Transaction Reporting processes.

The recent regulatory changes shown above provide much-needed alignment across countries and regions, closing the gaps and loopholes for money laundering gangs and terrorist financing networks to launder funds via digital transaction channels. The broadening of AML regulations is relevant for both Financial Institutions and Corporate organisations. Increased corporate and personal liabilities for AML compliance breaches or doing business with sanctioned entities can result in hefty fines or even imprisonment.

AML compliance programs

MLROs and Compliance Officers have to take a holistic view of their business when creating and implementing an AML compliance programme. They need to adopt an adequate risk-based approach (RBA) for their organisation, leveraging technology to provide transparency and a high-credence audit trail to show official regulators’ the decision process.  

Listed below are the four common cornerstones of a successful AML compliance programme adopted by Financial Institutions and Corporate businesses: 

Flexible compliance technology

MLROs and Compliance Officers face the challenge of balancing restricted budgets and resources against business needs and multiple compliance risks. The increasing demand for powerful and flexible technology shows no sign of slowing down and is driven by new AML regulations, increased personal and corporate liabilities and the need to stay competitive.  

Adopting cloud-based SaaS technology for managing payments, compliance, and risk is accelerating across regions, enabling technology vendors to continually innovate with new products, features, and functionality to meet changing customer needs.

The days of static technology with costly development, lengthy delivery cycles and high support costs are slowly fading away. There is a growing trend for Financial Institutions and Corporate entities to centralise their technology vendors, reduce duplicated effort, decrease the overall cost of compliance, and align technology solutions hosted on one unified SaaS platform. 

While there is ‘no silver bullet’, all organisations should ensure they regularly review, assess and update their compliance programme to help combat the latest money laundering and terrorist financing trends.

For more insight into how your peers are dealing with fraud and financial crime in their organisation, Download your copy: 2021 Treasury Fraud and Controls research report. Is your organisation one of the 1 in 5 planning to spend more on treasury fraud prevention, detection and controls?

This editorial was first published in our Financial Crime and Fraud Report 2021 - How to Fight Fraud and Master KYC, Onboarding & Digital ID, which provides a comprehensive overview of the major trends driving growth in fraud prevention, identity management, digital onboarding and KYC, transaction monitoring, financial crime compliance, regtech, and more.

About William Brown

William is an experienced product professional with over 17 years’ experience developing Governance, Risk and Compliance (GRC) software solutions for the corporate and banking sectors.  He works across the business, collaborating with engineering, marketing, and sales teams to launch and drive product development. William focuses on delivering value to Bottomline customers, passionate about staying abreast of market needs and the fast-moving technology curve.

About Bottomline

Bottomline makes complex business payments simple, smart, and secure. Global organisations rely on Bottomline for domestic and international payments, state of the art fraud detection, insider fraud protection, behavioural analytics, consolidated case management and regulatory compliance solutions. Bottomline offices are located across the US, Europe, and Asia-Pacific.