Every corrupt act in the world, from modern day slavery, human trafficking, organ trafficking, tax avoidance, to child sex exploitation is made possible by money laundering. Combatting this is our collective challenge but without technology the fight could be lost.
What Problem are we Trying to Solve?
To understand what problem technology is helping with we need to understand the problem we are trying to solve. The term anti-money laundering glosses over the problem. So let’s reframe the conversation.
What we are trying to achieve is the protection of businesses, industries, economies and society from being exploited by criminals - criminals trying to launder the proceeds of fraud, tax evasion, terrorist financing, human trafficking, child sex exploitation and modern day slavery.
Criminals are always a step ahead and know how to exploit weaknesses in systems and processes. When considering the larger world of transnational organised crime it must be assumed they have significant resources and access to a sophisticated market of enterprising criminal software developers to develop technologies to protect their ‘operations’. Larger financial organisations and multinational firms are entering a Digital Arms Race to outsmart and outpace the other.
Smaller firms may fly under their radar for the moment but it won’t be long before technology will drive criminal behaviour, not just our response to their actions. Detecting their behaviours is near impossible without using technology to separate the needle from the haystack.
Technology Automates and Simplifies
Digital transformation has historically focused on front line staff and on revenue generation. The risk posed by money laundering is now trending towards redirecting attention to implementing Regulatory Technology (RegTech) to protect organisations from money laundering, tax evasion and drug trafficking – all manner of financial crime.
We are seeing the beginning of a digital transformation and simplification of manual processing and activities across business.
It is Becoming Harder to Comply
There are a lot of moving parts in any organisation - add anti-money laundering compliance into the mix and it becomes harder to comply.
The four pillars of compliance are complicated enough:
1. Compliance Officer;
2. Tailored Internal Policies, Procedures, and Controls;
3. Ongoing, Relevant Training of Employees; and
4. Independent Review for Compliance.
But there is a fifth pillar:
5. Risk-Based Analysis for Customer Due Diligence and Ongoing Customer Due Diligence.
Core tasks such as real-time identity and watchlist verification, beneficial ownership structures, nature and purpose of relationship, and dynamic risk scoring enable ongoing customer due diligence and offer a ‘whole of customer’ AML view.
Beneficial owner information can be gathered and assembled from internal and external sources, providing full network analysis of beneficial owners, ultimate beneficial ownership and related parties. This enables the organisation to uncover potential links, threats, and provide insights in visual form to assist case investigation. These trigger events can also be delivered for immediate investigation.
Utilising the nature and purpose of the relationship enables the integration of know your customer (KYC) information with ongoing monitoring and is critical in the effective measurement and assessment of customer risk.
Technology enables the analysis of the information garnered from the onboarding process. It should analyse the customer’s: