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How to comply, without compliance being a burden

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The financial services sector is no stranger to regulation. And when it comes to compliance, eyes sometimes roll at the steadily growing burden. This is especially true around anti-money laundering (AML) measures, which have become a significant concern for banks and credit unions worldwide.

With this picture in the background, a recent article by Elisabeth Krecké for GIS Reports underscores a critical issue. Despite the vast resources allocated to combat money laundering, the current infrastructure seems largely ineffective. It’s thought they capture less than 1% of money laundering transactions globally. This stark reality highlights the need for a paradigm shift in our approach to compliance and AML strategies.

The High Cost of Compliance

The costs of regulation and compliance are not just financial. They also include the opportunity cost of not being able to allocate resources more efficiently. Many financial institutions maintain large compliance departments, primarily due to a lag in adopting effective automation. Hesitation stems partly from a lack of confidence in the ability of technologies to meet compliance needs without introducing new risks. Moreover, the need to ensure compliance mechanisms are agile and responsive in real time has proven challenging, exacerbated by regulatory overreach that can penalize institutions for non-compliance, even in the absence of actual money laundering.

The Power of Global Collaboration

To address these challenges, a more unified global approach to AML initiatives is essential. The Financial Action Task Force (FATF) has made strides towards this goal, but more decisive action is needed. In this, the European Union’s AML Authority could be setting a precedent. Its comprehensive framework suggests that international standards and practices could converge towards a more widely accepted model, and this is likely to influence compliance strategies globally, including in the Americas, Asia and Asia-Pacific

Another key to enhancing compliance efficiency is through increased data sharing among financial institutions. By breaking down data silos and facilitating the exchange of information, even among competitors, the financial sector can significantly reduce the risks associated with isolated data pools. Enhanced data sharing paves the way for improved analytics, leading to deeper insights and more effective compliance mechanisms. This is another barrier, as there are often misconceptions about what information can and cannot be shared lawfully. As a result, progress is slow.

Technology Does Provide the Solution

At the forefront of these next-generation compliance solutions is Compli from Essiell Compli. Compli exemplifies how leveraging advanced technology can transform the compliance experience. The Compli suite of services offers high levels of automation, enabling compliance officers to focus on decision-making rather than mundane logistics. Benefits like instant screening for sanctions and politically exposed persons (PEPs), real-time ID verification, and a powerful custom rules engine underscore the potential for technology to streamline compliance processes.

Moreover, Compli’s ability to access multiple databases for creating global client profiles, and its always-on transaction monitoring system, represent significant advancements in the fight against money laundering.

Finding the Win-Win

The challenges of compliance are daunting. However, the integration of global standards, enhanced data sharing, and the adoption of advanced technological solutions like Compli provide practical and cost-effective solutions. Thus, it is possible to reduce the burden of compliance and enhance the efficacy of AML efforts. By using this approach, financial institutions can safeguard their operations, guard their clients more effectively, and create a more secure and profitable industry. That’s got to be good.

By Declan Morton, staff writer at Essiell Compli.


For reference

Why Anti-Money Laundering Policies are Failing, Elisabeth Krecké, gisreportsonline, February 15, 2024

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