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Designing Next Gen AML: Balancing innovation and regulation 

Panel insights from Napier’s inaugural Disrupt Fincrime event in London on the theme ‘Balancing innovation and regulation’.

Mariya Pattara
June 13, 2023

Financial crime and the impact it wreaks on nations and their citizens has never been so prominently in the global spotlight. It has become clear that outdated processes and technologies can fall woefully short in the face of the escalating volume, velocity, and variety of global financial crime. Where some organisations are grappling with technology modernisation or lacking institutional knowledge and resources, are now turning to the power of next-generation solutions.  

At Napier’s Disrupt Fincrime event powered by PwC, compliance professionals and experts from across the financial services sector discussed approaches to Anti Money Laundering (AML) modernisation, and the potential pitfalls for organisations as they drive innovation across their AML processes. The panel discussion moderated by Araliya Sammé, Market & Product Strategy Napier, brought Marta Lia Requeijo, VP of Risk & Compliance, BVNK and Wendy Langridge, Chief Compliance Officer, Marex Capital Markets together to discuss the theme ‘Designing Next Gen AML: Balancing innovation and regulation’.  

The panellists shared their insights across three key themes.  

1. Overcoming challenges in AML and the impact of emerging risks

Criminals are always finding new and sophisticated ways to circumvent controls. Wendy Langridge highlighted that the historical focus has been on Customer Due Diligence (CDD) and Know Your Customer (KYC) regulations, with a disproportionate emphasis on documentation gathering rather than Transaction Monitoring (TM). In addition to CDD and KYC, organisations should strive to view the customer and associated ongoing activity holistically throughout the relationship, including the ongoing TM processes.  

Financial crime lurks within the whole lifetime of interactions with customers, not usually just at the point of onboarding. There can be an asymmetric information gap between compliance teams and regulatory authorities that may hinder the uncovering of hidden criminal networks and relationships, and complex patterns that hide beneath the surface. This necessitates a fundamental shift in how compliance departments are staffed, with a focus on specialised skills and leveraging the expertise of the front office in delivering the first line of defence.  

The panellists also raised the critical question of whether existing technology is sufficient, advocating for a more intelligence-led approach that combines technology, data, and human insights to view customer risks holistically. “You could have all the technology and the data in the world; but you need proactive people with a curious mindset for a true understanding of financial crime risk and drive outcome” said Araliya Sammé.

2.Uniting people, processes and technology in AML

In the complex world of AML, success lies in seamlessly uniting people, processes, and technology. Marta emphasised the importance of conducting comprehensive risk assessments and gap analyses, even at the fintech startup stage: utilising manual processes and tools in the early stages and transitioning to more sophisticated systems as the business grows.  

Wendy highlighted the advantage for startups with clean data and no legacy systems, which enables them to respond quickly to changes in product strategy. Wendy also acknowledged the challenges faced by larger organisations in data cleansing and system turnaround times. The consensus emerged that risk-based approaches must align with each firm's operational strategy and risk appetite, incorporating appropriate controls and frameworks.

While AI is transforming the way we approach screening and compliance procedures, it is important to note that technology alone cannot be the ultimate solution in tackling financial crime. Human involvement plays a vital role in understanding the potential customer impact of automation, and the fairness, and explainability of AI models. The goal is to leverage technology to flag areas for human investigation; thus, combining human expertise and customer interactions for optimal outcomes.

3.Driving better outcomes in FCC - the way forward in compliance

Bringing together intelligent information from different departments, combining fraud and AML procedures (FRAML), along with aligning operating models with compliance objectives will help achieve a more holistic view of financial crime compliance (FCC) and risks. Alone, siloed compliance teams can only achieve so much; but through collaboration and a shared goal, they can make a significant impact. The panel echoed this, emphasising the purpose-driven nature of compliance professionals’ work. Moving risks elsewhere without improving the overall landscape achieves little for the greater purpose of financial crime prevention.  

The panel also advocated the benefit of ongoing collaboration and knowledge sharing, particularly in the realm of Environmental, Social, and Governance (ESG) factors, which can lead to improved outcomes and leverage the industry’s initiatives in alleviating the impact on financial crime victims. The panel emphasised the role of regulator-led collaboration and innovation in developing compliant approaches to intelligence sharing, a key factor in outpacing organised criminals.  

By uniting forces, fostering collaboration, and embracing a purpose-driven approach, the collective efforts of compliance teams can create a stronger defence against financial crime, benefiting the world at large.  

Join us in Stockholm – Road to Perpetual Client Risk Assessment:

Register your interest here to join us for an informative seminar discussion at the British Embassy in Stockholm, where experts from the financial services sector will discuss the challenges and opportunities of modernizing AML systems and processes in light of recent financial crime compliance challenges.  

Photo by Giammarco Boscaro on Unsplash

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