As Anti-Money Laundering (AML) regulations and expectations have continued to grow and change (e.g., the new FinCEN CDD Rule and the 4th EU Money Laundering Directive), so too have the expectations of AML Officers and their teams. As masters of their domain,
their responsibilities have generally focused on ensuring that their policies and program are compliant with regulations. But as compliance with those regulatory requirements has impacted business through increased onboarding times and the resulting customer
dissatisfaction, the expectations for an AML Compliance Officer have evolved. Operational efficiency, technology transformation, and collaboration with the business have been added to the list of responsibilities that an AML Compliance Officer now maintains.
TECHNOLOGY – ENTERING THE UNKNOWN
Stepping outside their comfort zone, AML Compliance Officers will certainly want to hire specialists in each of these areas to work on their teams and potentially lead dedicated AML Operations and AML Technology teams. At the same time, AML Compliance Officers
need to be proficient enough in each area to be able to understand the larger picture and make decisions. Since AML Compliance Officers have always managed teams (which have continued to grow in size), the operations area is less of a stretch for them. Instead,
it is technology that is the greater unknown. Understanding financial technology (FinTech) and regulatory technology (RegTech) has become important several ways: 1) understanding the myriad of RegTech solutions that can help AML Compliance programs work more
efficiently and effectively; 2) understanding how to manage the risk of the increasing numbers of FinTech customers; and 3) understanding how to monitor new technologies and related products for suspicious activity.
- Understanding How RegTech Solutions Can Improve Efficiency and Effectiveness
The answer to creating more efficiency and effectiveness for an AML Compliance Program is no longer simply adding more headcount to the team. Instead, AML Compliance Officers need to consider Robotics, Machine Learning, Data Analytics, AI, and even Business
Process Management solutions as a way to enhance the how well and how fast their teams complete their work. Understanding what each of these solutions can and
can’t do is extremely important to selecting a solution that is fit for purpose. AML Compliance Officers need to be comfortable to innovate and embrace some of these solutions, while understanding the true capabilities of the solutions. If used properly,
these technologies can allow for work to be managed more efficiently, allow analysts to focus on complex analysis rather than manual and repetitive data collection, assist in identifying hard to identify suspicious activity, and create consistency within the
execution of the program.
- Understanding the Risks of FinTech and Startup Customers
The number of startups and FinTech companies continues to grow year after year. As banking customers, they pose a unique set of risks issue as they are generally still maturing and changing as a company. Accordingly, the risks that they posed when first
onboarded may drastically change during the life of the relationship, as the company refines its business and expands to new customer bases. This doesn’t mean they are too risky to take on as customers, it just means that the due diligence and monitoring of
them will need to be tailored to their unique and changing risks, differing from what is done for standard mature companies.
- Monitoring New Products and Technologies for Suspicious Activity
At the same time that FinTech companies are posing challenges as banking customers, they are also driving many financial institutions to innovate their own products to compete with them. While new banking channels, products, and payment abilities are great
at attracting and retaining customers, likewise, they provide criminals with the opportunity to innovate how they launder money (e.g., transaction laundering). Understanding how these technologies work is essential for AML Compliance Officers and their teams
to figure out how they can be used for criminal activity and how they can best be monitored for red flags. At the same time, as banks looks to provide new products/services, AML Compliance Officers are becoming more involved in the planning and decision making
around those products/services to identify and plan for any AML risks as early as possible.
DO THESE CHANGES HAVE AN EFFECT ON REGULATORS TOO?
As AML Compliance Officers and their teams continue to evolve and innovate, the regulators who are examining their programs need to keep pace with their understanding of those evolutions and innovations. AML Compliance examiners need to not only be experts
in AML compliance programs but also the risks associated with new types of customers and products, as well as the various technologies that are used to enhance the AML compliance program. By doing so, they will be more effective in identifying issues and ensuring
that AML compliance programs are responsibility innovating in their approach to preventing money laundering and terrorist financing. This isn’t a surprise to AML regulators, as they discussed this very topic during a panel on the latest compliance trends for
2017 at the recent ACAMS International AML & Financial Crime Conference in Florida.
As technology continues to evolve, AML professionals need to evolve with it. Once the growing pains are over, financial institutions will ultimately be more effective and efficient at preventing criminals and terrorists from taking advantage of the financial