AML Program Risks Highlighted by the Pandora Papers Scandal

Experts have advised compliance officers to divert their focus on EDD, CDD, and UBO verification processes, instead of focusing on individual revelations.

Experts are advising compliance officers in financial institutions to concentrate on strengthening the Anti-Money Laundering (AML) program risks highlighted by the recent Pandora Papers scandal, rather than focusing on individual revelations

Their comments are a response to the ongoing investigation of current and former government officials and high-profile individuals who have been exposed by the Consortium of Investigative Journalists (CIJ) for money laundering, tax evasion, and other crimes.

Instead of fixating on any salacious details, financial institutions should pay heed to the information, and the revelations “need to be taken in stride,” stated Lauren Kohr, a veteran compliance officer who now serves as senior director of AML for the Americas with the Association of Certified Anti-Money Laundering Specialists (ACAMS).

“There is a lot to consider, and we do not want to send our AML officers on an ineffective and inefficient wild goose chase for every data point leaked and how that may impact their AFC [anti-financial crime] compliance program,” Kohr added. “Given that it is so early in the leaks and assuming this will go on for days, weeks, and months, AML officers should not have a knee-jerk reaction.”

Kohr stated that financial institutions should pay heed to evaluate the effectiveness of their overall risk-based Anti-Financial Crime program, with particular focus on Enhanced Due Diligence, Customer Due Diligence, and UBO verification. She also advised financial institutions to closely monitor high-risk customers, products, services, geographies, and transactions to prevent the risk of frauds such as money laundering and terrorism financing. 

To minimize scandals such as the Pandora Papers in the future, FinCEN is currently working towards the creation of a beneficial ownership registry, implementing the Corporate Transparency Act enacted along with the Anti-Money Laundering Act of 2020.

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