loader image

Compliance is About More Than Initial KYC

Share this post:

In the UK, Money Transfer Businesses (MTBs) are regulated by the Financial Conduct Authority (FCA). The aim is not just to ensure proper conduct within financial service businesses, but also to limit the extent to which businesses, and therefore the whole financial sector, are exposed to financial crime. Regulations are therefore far-reaching and impact directly on the way MTBs operate.

At the heart of this environment are the initial Know Your Customer (KYC) checks. But effective compliance requires a comprehensive approach that goes further. It  includes ongoing transaction monitoring to minimise the insidious risk of financial crime.

Transaction monitoring is the key to effective compliance

Anti-money laundering (AML) checks as part of KYC are essential. These verify a customer’s identity and address, assess their risk of money laundering or terrorism financing, and cross-check against sanctioned individuals and politically exposed persons. Best practice suggest that KYC checks should be revisited regularly. This ensures that the information remains accurate and up-to-date, reflecting any changes in the customer’s risk profile.

However, this is just the start. To genuinely protect against financial crime, MTBs must implement continuous and robust transaction monitoring systems. Only by continuously analyzing transactions can MTBs hope to identify anomalies and reduce the risk from financial crime. And the rise of publicly available artificial intelligence (AI) means that bad actors can easily create multiple identities and move money in many small, difficult-to-trace amounts. Consistently accurate transaction monitoring is the best defence against such strategies. It’s also the best way to demonstrate true diligence.

Take note of FCA advice

This prudent approach fits with the FCA’s planned updates to its Financial Crime Guide. They highlight the need for sophisticated transaction monitoring capabilities. Such systems must be able to handle high volumes of transactions efficiently. For MTBs, the scale of this task is significant. Manual monitoring is impractical and prone to errors. Automation is the only viable solution; automated compliance systems can swiftly process large quantities of data, and identify patterns that human analysts might miss.

Importantly, these systems need not be prohibitively expensive. Partnering with the right third-party provider can ensure cost-effective solutions that are also comprehensive and easy to use. When choosing a transaction monitoring solution, MTBs should look for providers that offer comprehensive services, cost efficiency, and ease of use. The solution must handle the specific needs of MTBs, such as high volumes of relatively low-value transactions. Furthermore, the system should be flexible, allowing for rapid scaling to accommodate business growth.

Effective compliance need not break the bank

While there are many compliance services on the market, there are few which tick all the boxes. One which does is Compli from Essiell Compli. Compli offers a robust package of KYC and ID verification, and an automated transaction monitoring system that ticks all the right boxes. It is comprehensive, cost-effective, user-friendly, and highly scalable, ensuring that MTBs can manage their compliance needs efficiently.

Effective transaction monitoring brings numerous benefits. It enhances protection against financial crime, thereby safeguarding both the business and its customers. It also ensures demonstrable regulatory compliance, reducing the risk of compliance failures and the associated fines and reputational damage. So, if you’re an MTB looking to safeguard your future, look for a partner that understands your market, and takes the risks of financial crime seriously.

By Declan Morton, staff writer at Essiell Compli.


For reference: Tackling financial crime requires cross-sector international co-operation, Ben Cooper in the Financial Times, Opinion, 8th May 2024;  Latvian fintech Huntli partners with US-based Payall to enhance cross-border payment security and compliance, Nurcin Metingil in Arcticstartup.com, 7th May 2024.

Share this post:

Our latest posts