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4 Trending Standards in AML Compliance

Standards in AML Compliance

Regulations like anti money laundering (AML) compliance are not new to the financial services sector. They have prevailed for years and businesses have implemented them only marginally, if at all. Compliance is often viewed as an unnecessary cost to businesses. If it were not for the fact that companies are legally bound to implement it, they would have been dropped altogether. However, with the proliferation of tech, there are more cost-effective and easier solutions now available in the market. Some of the standards that are currently prevailing with regards to AML compliance are as follows;

The Need for Skilled Resources and Better Screening Processes

According to reports and statistics available, the number of false positive alerts generated by outdated existing screening measures lies somewhere between 75 to 90 per cent. Every false positive alert has to be investigated individually and can take anywhere between five minutes to half an hour to investigate and close. Banks and financial institutes usually deal with mounds of transactional data. When the compliance staff is left to deal with thousands of alerts every month, it is likely that they may end up missing a valid one. Thus it is necessary to look for solutions that are effective rather than efficient. Luckily, a number of breakthroughs have been made by the FinTech industry in developing screening tools that produce better results and outcomes.

The Evolution in the Regulatory Landscape

Global financial regulators have been vigilant in the past few years as money laundering activities have been increasingly linked to funding of terrorist factions and drug operations. Banks and financial institutes have been becoming wary about taking on clients that pose even the slightest of risks. However, regulators mostly suggest that companies evaluate each case individually to check the amount of risk it poses. This requires a comprehensive customer due diligence (CDD) process to be carried out at the time of client onboarding. As financial crimes all over the world get complicated, the compliance regulations for governments and businesses have also become more sophisticated.

Prevailing Compliance Methods Need to Go

Manual methods of customer verifications used by banks are found to be tiresome by customers. Studies found a nearly 13 per cent chance of customers leaving due to a bad KYC experience. Financial institutes have to work hard to develop AML best practices and implement faster customer verification processes. This can enable them to advance their onboarding process thus accommodating more customers at a time.

Introducing Advanced RegTech in Compliance Processes

The RegTech sector – a subset of the FinTech industry – has made astounding breakthroughs in developing automated regulatory processes. AML screening and checks are now available that can authenticate a client’s status within seconds. Such technologies use artificial intelligence and machine learning protocols to screen a client’s name through global watchlists. Additionally, risk analytic solutions are also available that also use machine learning to screen the client’s data more efficiently.

The financial services sector needs to look more carefully towards implementing automated compliance solutions to comply with anti money laundering regulations worldwide.

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