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MTBs: Maintaining Regulatory Compliance is Easier Than You Think

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Money transfer businesses (MTBs) play a vital role in the global financial ecosystem, facilitating cross-border transactions for millions. However, the sector also faces increased scrutiny due to its potential for misuse by criminals.

Financial crime is a significant global threat. Estimates of its approximate annual value range from 2 trillion US dollars (HSBC) to 3 trillion US dollars (NASDAQ). In the UK alone, the figure is believed to be around £47 billion a year. To combat this, regulatory bodies have  strict compliance powers, with significant penalties for non-compliance, particularly regarding money laundering (AML).

Even small businesses must be compliant

For Money Transfer Businesses (MTBs), appreciating this is a necessity. The consequences of non-compliance can range from heavy fines to criminal prosecution, depending on whether breaches are accidental or deliberate. However, while penalties can be severe, the goal isn’t to cripple businesses. Rather, regulatory sanctions serve as a powerful deterrent to ensure full compliance.

To mitigate these risks and contribute to the fight against financial crime, it’s imperative for all financial service providers to adopt a structured approach to regulatory compliance. It is tempting to think of the regulations as intended for large businesses only, but MTBs of all sizes are affected, and each has the same duty to help fight financial crime.

The disciplined strategy begins with rigorous customer identification and verification. This step is crucial for building a comprehensive customer profile that meets Know Your Customer (KYC) requirements. These include anti-money laundering (AML), anti-terrorism funding checks, and screenings against lists of sanctions and politically exposed persons. While these measures might seem excessive for the average customer sending money abroad, they are essential in reducing the activities of criminals who often rely on operational complacency.

Automation – the key to truly effective compliance

Following customer identification, the next phase involves ongoing transaction monitoring. This ensures that customer behaviour is consistently scrutinized to identify any suspicious activities. For regular customers, periodic KYC reviews will also be required. These processes are well understood within the industry; the true challenge lies in executing them efficiently and consistently, to guarantee effective and uniform compliance. The answer lies in automation.

In this context, truly effective tools are invaluable. The best solutions, like Compli from Essiell Compli, are known for their comprehensive coverage spanning multiple critical areas. They’ll include efficient and thorough checks for KYC and the capacity to deal with high volumes of customers and transactions – cost effectively. Compli adds to that with a rare service that flags stolen or repurposed information used in fraudulent identities.

Following the completion of KYC, continuous monitoring of customer behaviour patterns is crucial. Only top-tier services can identify and signal unusual or dubious activities for further investigation while minimising false positives.

Flexible and responsive services, without breaking the bank

Additionally, they’ll offer the flexibility to adapt to the evolving needs of the business with near infinite scalability and a customizable rules engine. Both allow for the fine-tuning of the compliance process while also meeting changes in demand.

The comprehensive nature of services like Compli ensures that modern MTBs can meet the stringent requirements of financial regulatory compliance with a seamless approach that makes everything easier. While adherence to compliance is beneficial in itself, the knowledge that all processes are handled correctly means businesses can concentrate on their core mission: delivering cost-effective services to their customers.

By Declan Morton, staff writer at Essiell Compli.

For reference: New strategy to tackle organised crime, gov.uk, December 2023; HMRC internal manual, Economic Crime Supervision Handbook, gov.uk, May 2023; The ultimate KYC checklist: Ensuring compliance in FinTech, Fintech Global, 9th May 2024

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