Top 6 trends in Anti-Money Laundering for 2020

Richard Marley

February 27, 2020

AML Regulations for Businesses

Anti-money laundering (AML) screening has been employed by financial institutions to detect suspicious transactions and analyzing customer data. AML is to filter customer data, classify it according to the level of suspicion and inspect it for errors like any sudden and substantial increase in funds or a large withdrawal or many others. AML screening is used to detect money laundering, terrorist financing, and tax evasion, etc. The businesses are required to conduct proper AML due diligence to comply with AML regulations. Global organizations need to keep check and balance and devise a proper AML program. Relevant customer data is screened through official and non-official high-risk watch lists to identify potential risk customers. Moreover, businesses must have the legal documents of their distributors and resellers to verify that they are complying with global AML regulations.

6 Trends in AML to Watch out for

According to the European Banking Authority(EBA), AML is the top priority for the EU in 2020 as money laundering and terrorist financing are the main threatening risks. To address the issue EBA will form a new committee to ensure a collaborative approach towards the problem by working on a superimposable implementation of different policies. The aim is to investigate the breaches of AML regulations and take necessary actions. Following are some trends of AML to watch in 2020:

Get ready for more information on Ultimate Beneficial Owners

The many creative ways criminals use shell companies and offshore structures to hide their laundered money have become public knowledge after Panama Paper leaks. To counter this, this year we expect ultimate beneficial ownership legislation to become a vital feature of the financial crime landscape. Global focus on UBO transparency will ramp up this year as a consequence of many legislative actions from last year. Steps are taken in the UK to introduce the ultimate beneficial ownership register for businesses by the end of this year and we are expecting to see further progress in all these jurisdictions.

Regulatory Regimes get an Overhaul

In 2019 money laundering scandals were never far from the headlines. For instance, the Danske Bank scandal which exposed the threatening level of suspects that flowed unchecked through European banks in past years. This year European authorities will be less lenient and more assertive with enforcement when dealing with financial crimes. As the UK is committed to being a leader in fighting financial crimes and delivering effective financial regulations, this year the enactment of sanction and AML bill will give the UK the power to introduce its own AML legislation bill. Except for the UK, the US will maintain its regulatory financial footing by introducing new Fintech regulation.

Standard AML rules for Crypto-businesses

As global cryptocurrency adoption continues, 2020 will be the year that such organizations get serious about AML compliance. Crypto poses AML risks for years and authorities have wrestled a lot for it. Now is the time that exchanges and mining will take a considered approach allowing for trade and investment under tight restrictions. The uneven landscape of cryptocurrency has prompted the development of the global regulatory framework. The EU’s Fifth Anti-Money Laundering Directive AMLD5, implemented on 10 January 2020, will blow AML obligations for cryptocurrency exchanges which are to be compiled this year. All this enlightens that influencing big moves are expected in the global regulation of cryptocurrencies to prompt the industry to adopt new monitoring tools. So such exchanges will have to adhere to AML compliance this year as there is no other way.

FinTech drives Demand for Automated AML

In 2020, a large number of firms will move to automated AML checks to scale faster in this increasing consumer adoption and subsequent transaction volume in this competitive FinTech climate. Manual AML generates a massive amount of false positives which makes it difficult to onboard customers and process payments. Among so many false alarms there are high chances of missing the actual money launderers. So businesses are adopting digital solutions for AML and KYC to check who they are dealing with. This automation takes less time and is cost-effective.

6AMLD is in the Next Big Change

Another AML directive by the EU is in the pipeline this year. This time the EU is keeping up with changing the international regime and targeting for uniform AML and CFT practices across the member countries. The new directives are to be integrated into national laws of member states by December 2020 and the reporting entities are required to fully implement the laws by June 2021. This new directive is well-drafted to close any loopholes left in AML and CFT regulations previously.

Enhanced Transaction Monitoring Solutions

This year, financial regulators will place an increased focus on the monitoring of AML risks which will include a push for businesses to adopt proper transaction monitoring processes. Regulators will expect businesses to have an effective system in place to monitor transactions. NYDFS Part 504 legislation will drive this requirement as a general move towards controls measured by the quality of outcomes. To help financial institutes configure a range of monitoring scenarios and analyze data more efficiently genuine suspicious activities need to be separated from false positives. In this regard, the availability of new transaction monitoring software platforms will become essential in 2020. Firms will gain a competitive advantage if they identify suspicious behavior patterns while cutting operational workloads.