Financial Crime World

Financial Institutions Must Adapt to Evolving Financial Crime Regulations

The financial industry is facing increasing pressure to combat financial crime, with regulatory demands and costs mounting. Despite the evolution of key controls such as Know Your Customer (KYC), screening, and Anti-Money Laundering (AML) monitoring and investigations, their effectiveness and efficiency often remain an issue.

Financial Institutions Struggle to Meet Compliance Obligations

Financial institutions are struggling to meet their financial crime compliance obligations due to increasing regulatory demands, cost pressure, and a legacy of inefficient technology and operations. This leads to significant compliance risk and the threat of regulatory censure or fines.

New Approaches and Technologies Needed

To combat money laundering, financial institutions need a cost-effective, sustainable solution that uses innovative technologies such as workflow, analytics, Robotic Process Automation (RPA), and machine learning to improve and accelerate risk detection and remediation.

European Commission Proposes New Rulebook for AML/CTF Framework

The European Commission has released an action plan to strengthen the EU’s framework on fighting money laundering and terrorist financing. The proposed measures will significantly alter the current EU AML/CTF legislative and supervisory framework, requiring financial organizations to assess how these changes could impact their operations.

Increased Regulatory Oversight Expected

With the new rulebook, financial institutions can expect increased regulatory oversight, which will lead to more stringent requirements for financial crime prevention. Institutions must be prepared to adapt to the changing landscape of AML/CTF regulations and technologies to ensure compliance and mitigate risks.

COVID-19 Pandemic Triggers Unprecedented Change

The COVID-19 pandemic has triggered unprecedented change in customer behavior patterns and transaction volumes, forcing financial institutions to recalibrate their risk assessment processes and monitoring strategies to address emerging risks and typologies.

Financial institutions must carefully evaluate client risk-rating decisions due to disruptions in KYC processes for new and ongoing clients. Limitations in client outreach, disruptions to day-to-day operations, and losses are expected to impact the KYC processes. Institutions should transition to or increase their reliance on digital onboarding solutions to minimize disruptions in customer onboarding processes.

Mitigating Risks During the Pandemic

Financial institutions can mitigate risks by:

  • Carefully evaluating client risk-rating decisions due to disruptions in KYC processes.
  • Limiting limitations in client outreach, and adjusting day-to-day operations.
  • Recalibrating financial crime change initiatives and tuning financial crime monitoring processes and systems to the “new normal”.
  • Transitioning to or increasing reliance on digital onboarding solutions.

By adapting to evolving financial crime regulations, leveraging innovative technologies, and mitigating risks during the pandemic, financial institutions can ensure compliance and maintain a competitive edge in the market.