Financial Crime World

Financial Institutions Face Heightened Pressure to Prevent Financial Crime in Chile

As financial institutions navigate the complex landscape of regulatory demands and increasing cost pressures, they must also contend with the ever-evolving threat of financial crime. In recent years, fines for money laundering and sanctions violations have reached staggering levels, with tier one banks spending over $1 billion annually on financial crime operations.

The Need for Innovative Solutions

To stay ahead of these challenges, Chilean financial institutions are turning to innovative technologies such as:

  • Artificial intelligence (AI)
  • Robotic Process Automation (RPA)
  • Machine learning

These technologies can improve and accelerate risk detection and remediation. However, despite the evolution of Know Your Customer (KYC) screening and Anti-Money Laundering (AML) monitoring and investigations over the past decade, their effectiveness and efficiency often remain an issue.

Impact of EU Action Plan on Chilean Financial Institutions

The European Union’s recent action plan to strengthen its framework on fighting money laundering and terrorist financing is also having a significant impact on Chilean financial institutions. The proposed measures will alter the current EU AML/Counter-Terrorist Financing (CTF) legislative and supervisory framework, requiring financial institutions to adapt quickly to new regulations.

Challenges Faced by Chilean Financial Institutions

In response to these challenges, Chilean financial institutions are being advised to:

  • Carefully evaluate client risk-rating decisions due to disruptions in KYC processes for new and ongoing clients
  • Recalibrate their AML and KYC refresh initiatives
  • Tune their financial crime monitoring processes and systems to the “new normal” brought about by the COVID-19 pandemic

Mitigating Risks through Digital Onboarding Solutions

In a bid to mitigate these risks, Chilean financial institutions are being encouraged to:

  • Transition to or increase their reliance on digital onboarding solutions to minimize disruptions in customer onboarding processes
  • Pivot ongoing financial crime monitoring strategies to take disrupted transaction patterns into consideration and recalibrate transactions monitoring strategies to align with relevant risks and effective parameters

Conclusion

As the financial landscape continues to evolve, Chilean financial institutions must remain vigilant and proactive in their efforts to prevent financial crime. By embracing innovative technologies and adapting quickly to changing regulatory demands, they can stay ahead of the curve and protect both their customers and their reputation.