Financial Crime World

Mitigating Anti-Money Laundering (AML) Risk in Correspondent Banking

The Importance of a More Effective Approach to AML

Correspondent banking is a critical aspect of global trade and finance, but it also poses significant risks related to anti-money laundering (AML). De-risking, or the practice of removing or limiting relationships with high-risk customers, can lead to a reduction in cross-border payments and push criminals into unregulated channels.

The Cost of Financial Crime Compliance

  • The 2020 global compliance report showed that the cost of financial crime compliance is now almost $214 billion, an 18% annual rise.
  • This highlights the need for a more effective approach to AML in correspondent banking.

Innovative Solutions for AML Compliance

Entity-Centric View of Activity

With advanced technology in place, financial institutions can obtain all available data to take an entity-centric view of activity. This streamlines compliance procedures and leads to a better understanding of respondent banking partners and the customers they serve.

Reducing AML Spending through Technology

Technology solutions can help reduce money laundering exposure while maintaining more relationships with respondent counterparties. Companies that focus on technology also saw reduced negative impacts (17%-25%) for compliance procedures affected by the COVID-19 pandemic.

Improving Correspondent Banking KYC and CDD Processes

  • Simplify Onboarding Information: Capture onboarding information in line with the Wolfsberg Questionnaire.
  • Screen Respondent Banks: Screen respondent banks against sanctions lists, PEP lists, adverse media, and other potential risks.
  • Visualize Relationships: Visualize relationships to quickly understand connections between entities and pinpoint suspicious transactions between counterparties.

Conclusion

A more effective approach to AML in correspondent banking is essential for mitigating risk and reducing the cost of financial crime compliance. Innovative software solutions can provide better data and decision-making capabilities, allowing financial institutions to streamline their processes and improve their understanding of respondent banking partners and their customers. By leveraging technology, financial institutions can reduce money laundering exposure while maintaining more relationships with respondent counterparties.