AML Compliance Oversight: The need for protection

^{Claudio Fernandez Arao once hired a great marketing manager, with an impeccable career record, for his client only to later see an unhappy client. Turned out that the manager was fired by an earlier organization he had worked for his unethical conduct. If only he had not taken the shortcut for the reference check, his unblemished record would have faltered, he believed (Source: Economic Times).}

^{In 2012, HSBC had to enter a deferred prosecution agreement with the U.S. Department of Justice (DOJ) and pay $1.9 billion in fines as their lack of AML compliance lead to a flow of illicit funds (Source: Reuters)}

^{Financial fraud and money laundering have become very common. Through Money laundering schemes, fraudsters have fleeced funds from many organizations. They use intelligent tactics like structuring and round-tripping. In structuring, large amounts of money are split into multiple transactions to avoid suspicion. In round-tripping transfers are made during trips via countries that have low law enforcement.}

^{Typically, these schemes follow a three-step process –}

• ^{Placement through a business or cash deposit in a bank account}
• ^{Layering through separation of money from its source by involving multiple entities and countries}
• ^{Integration to make money look clean and legitimate}

^{To prevent these frauds, regulatory oversight is much needed. Regulatory bodies like Financial Crimes Enforcement Network (FinCEN) identify suspicious behaviour flags like unusual transactions, large wire transfers, and unexplained changes of beneficiaries to prepare AML lists with the aim to prevent money laundering, illegal activities, and terrorist financing. These lists contain information associated with entities and individuals involved in prohibited activities or crimes.}

^{These lists are then referred to by financial institutions to screen their customers and partners. These institutions are required to follow regulatory guidelines and screening processes as a part of legal compliance to keep safe. To ensure that institutions do what is needed, regulatory bodies have imposed fines for non-compliance.}

^{However, oversight is not so simple as just checking details of customers or partners against AML lists at the time of onboarding. The prevention can only happen when transactions are also monitored in real time. Regulatory bodies also keep triggering alerts for investigations for new-found AML entities or individuals that an organization must remain updated with. Automated screening systems can help keep tabs on the latest AML databases and compare customer data with them to check for red flags. If a transaction is found to show red flags, Suspicious Activity Report (SAR) needs to be filed for further investigation.}

^{Managing compliance oversight for your organization}

^{While AML screening is a mandatory step in compliance, it is a more reactive approach that is taken on an interim basis. It is better to always stay prepared to deal with compliance requirements so that you have no reputation-damaging surprises.  Here are some steps that you can take to avoid compliance failures, financial risks, and punishments because of non-compliance:}

^{1. Conduct regular assessments and audits to ensure that AML list screening is done accurately and effectively. The use of a screening tool that checks data in real time and alerts you in case of any match with the AML sanction list can help you stay safer.}

^{2. Follow a proactive approach by educating employees on AML screening, recognizing suspicious activities, and AML regulatory compliance so they can recognize reg flats and become whistleblowers preventing fraud. Also, make sure that you have protection measures in place for them so that they can fearlessly report suspicious activities to the management.}

^{3. Update AML lists regularly so that your compliance program is following updated data. Also, stay updated with the changes in AML regulations.}

^{4. Implement robust due diligence procedures and extend your oversight to your partners and vendors to ensure they also follow the regulation requirements.}

^{5. Establish clear protocols and procedures for screening, transaction monitoring, suspicious activity detection, investigating, escalating issue, and reporting.}

^{6. Keep records of your screening and monitoring activities as they help you demonstrate compliance and report to the regulatory agencies. You might have to maintain a number of records like due diligence records, transaction monitoring records, AML list screening records, Alerts and Escalation records, Investigation records, and training attendance records.}

^{Effective regulatory compliance oversight related to AML lists is essential for financial institutions as it helps them identify and assess potential risks related to money laundering, terrorist financing, or illicit financial activities. It helps maintain the integrity of the financial system and contributes to broader efforts to combat financial crime.}

^{Gone are the days of manually compiling and maintaining sanctions lists, which consume valuable time and resources. With the BizProspex AML Sanctions List, you can focus on core business activities, confident in the knowledge that your compliance efforts are robust and up-to-date.}

 ^{As the ‘reg-tech’ sphere continues to evolve, it’s imperative that businesses stay ahead of the curve. Our regulatory compliance database empowers you to do just that, providing a reliable tool to aid in your compliance journey.}