AML Compliance

Shufti Pro integrates AML Compliance into its end-to-end Verification Services

Shufti Pro has now launched AML compliance in its set of identity verification services to provide comprehensive risk assessment and due diligence to its valued clientele. In the UK more than 200,000 cases of money laundering are reported by the authorities annually. So, Shufti Pro has extended AML compliance to better serve its clients, especially those belonging to the Banking and Finance sector. Shufti Pro is already an emerging force in Digital KYC services with nearly 40 customers already acquired before the conclusion of its 3rd quarter since inception. With the launch of the AML product, Shufti Pro has achieved the status of a comprehensive solution to perform identity verification. AML compliance from Shufti Pro will allow banks to provide services like remote account opening, movement of funds, and offshore banking with enhanced Risk assessment.

Methods of Money Laundering

As online crimes are evolving, financial criminals are acquiring the newest and more sophisticated ways to convert their illegitimate funds as lawful. Thus, regulators are continuously stressing upon the money laundering issues. On the contrary, banks and other firms are constantly updating their AML policies to address this growing threat. The most common money laundering tactics used around the world is through digital banking, smurfing, currency exchanges, physical movement of cash cross border through cash smugglers, wire transfers, investing in real estate, gambling, auctions, building shell companies, disguising the movement of money through the trading system, counterfeiting currencies, and the use of bitcoin to hide the original sources of money.

Out of all these money laundering strategies, trade-based money laundering has received relatively less attention. Trade-based money laundering leverages the international cross-border or domestic trade system to veil the sources of illicit money through trade transactions into legitimate revenues. It involves misleading pricing, less quantity, or low quality of trade such as goods and services either imports or exports. The international trade systems are seemingly very complex and prone to vulnerabilities that can easily be abused by money launderers. As it necessitates the inclusion of multiple parties and jurisdictions which as a result makes the entire due diligence process including AML checks much more taxing. Thus, making it easier for money launderers to exploit and take advantage of the system. 

A 2015 report by Global Financial Integrity (GFI),  reveals that the illegal flow of finances accounted for $7.8 trillion from developing economies between the years 2004 and 2013 which entails  83% of trade-based money laundering. 

The act of concealing money is an ancient technique used for many years, but money launderers are always one step ahead of finding the newest ways to move illegal money undetected. Therefore, international governmental organizations have underlined the need for AML products and services to detect and demarcate the issue altogether. 

 What is AML Compliance?

AML stands for Anti-Money Laundering and it is a practice being adopted by financial institutes, banks, and now even by crypto enthusiasts conducting ICOs. It is reported that crypto thefts, hacks, and frauds reached an estimated $1.36 billion in the first few months of 2020. The total amount stolen in crypto exceeded the stolen $4.5 billion in 2019. 

With central banks and international monetary organizations clamping down on tax evasion, money laundering, and related financial crimes, it is becoming more and more important for banks and financial institutions to verify not only the identity of their customers but to ensure that the sources of their funds & transactions are also legitimate. An AML compliant software is able to perform background checks for risk assessment and due diligence.

Importance of AML products for financial institutions 

AML products for fraud prevention are mandatory for financial institutions to monitor, evaluate, detect, and report suspicious transactions to the regulatory authorities as they happen. It not only strengthens the entire infrastructure but also enhances and accelerates the existing anti-money laundering processes in terms of effectiveness. AML products and services include and are not limited to transaction monitoring systems (TMS), currency transaction reporting systems (CTR), compliance software to help firms comply with AML regulations by FATF , and customer identity verification solutions. All these AML products not only automate the detection process but imperatively eliminates the root cause of the problem to prevent it from happening again in the future. AML products by Shufti Pro can help companies uncover criminal activities, and save themselves from heavy penalties for non compliance. 

 How Shufti Pro provides AML Compliance?

AML Compliance software by Shufti Pro is powered by more than 1000 checklists and 3000 databases maintained by national and international law enforcement agencies, monetary organizations, and anti-money laundry watchdogs. Not only Shufti Pro has such a large data bank to perform background checks but its system updates that data bank every 14 minutes, so that any new entry or removal from these lists or databases is timely updated as well.

AML/CFT takes a new meaning with Shufti Pro as it is not limited to a few countries or some dozen languages. This Artificial and Human Intelligence Hybrid product is available all around the globe and provides Universal Language support as well. So no matter which country a bank operates in or from where their clients belong to and no matter what is the official Language for documentation in that territory, Shufti Pro’s aml product will be a trusted companion for risk assessment and due diligence.

Shufti Pro’s AML products will be providing Robust risk assessment through its round the clock available financial crime risk data. Customer onboarding will not be an issue with AML compliance offered by Shufti Pro as it maintains an industry best processing time of 30-60 seconds. End-to-end identity verification from Shufti Pro is PCI certified and adheres to GDPR standards as well, so customer data will remain secure as well and customers of Shufti Pro will not be liable for any data theft risks, government penalties, or 3rd party liabilities.

Shufti Pro aims to create an online marketplace that is free of fraud, identity thefts, and malicious activity. Extension of AML compliance services are a testament to Shufti Pro’s resolve and it intends to fully optimize its end-to-end verification to usher a new age of due diligence and risk assessment.

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Customer due diligence in banking

How does CDD effectively help with AML Compliance?

CDD or customer due diligence in the banking sector and other financial firms is an important aspect of AML compliance. There are various international regulators that have strict guidelines issued over the years in order to clamp down money laundering and transference of funds for terrorist activities. United States’ Federal Financial Institutions Examinations Council on Customer Due Diligence (FFEIC) and the Financial Action Task Force (FATF) are among some of the major global organisations to set forth the regulations to combat financial crimes. 

Here are some of the basic pointers to help you understand the phenomenon of Customer Due Diligence for banks and other financial institutions along with AML compliance. 

Customer due diligence in banking industry

Customer due diligence means identifying who your customers are by verifying various pieces of information such as their name, address, date of birth, and official identification document obtained from a reliable and independent source. 

In today’s heavily regulated markets it is more important than ever to know your customers. Identifying them accurately using KYC processes for customer due diligence during the early stages of onboarding can ensure that your organisation does not lose money to frauds or that your institution is not charged with a fine from national or international regulators for non-conformity. The main benefit of the customer due diligence process in banking is therefore assessing the level of financial risk a customer may pose to your overall operations through a risk-based approach. There needs to be a solid effort on part of the financial institutions including banks to follow through the money trail, origin & destination of transactions, legality of the business, and revenue streams. International governments around the globe are increasingly stressing upon the importance of the customer due diligence for banks, and to have sufficient processes in place to verify and identify their customers. Customer due diligence in banking is important to prevent significant financial losses due to reputational, operational, and legal damages, caused by money laundering and related financial crimes. 

The customer due diligence process in banking ensures that the banks regularly maintain and update their policies to verify customers’ during onboarding and to determine the on-going pattern of transactions to detect money-related crimes through suspicious accounts. 

With the right customer due diligence in banking practises, banks and other financial institutions can drastically lower the risk of financial crimes and can improve customer onboarding and experience altogether.

Types of Customer Due Diligence for banks

There are three types of customer due diligence known in the banking industry: Standard, simplified, and enhanced due diligence, respectively.

Standard due diligence:

This type of due diligence process for banks involves the initial stages of verifying and identifying customers through KYC practices. Here, customers are verified based on their personal identity information and government-issued ID documents. This process is performed by a reliable and independent third-party source. Standard due diligence in the banking industry purposely prioritizes those with moderate risk elements. It is carried out to uncover the intended reason for a business partnership, in case of large transactional volume, or suspected criminal activities.

Simplified due diligence:

Based on risk assessment approaches, this type of due diligence in the banking industry involves considerable low or no risk of financial crimes such as customers who are residing in low-risk areas can be identified simply through ID documents and PII.

Enhanced due diligence:

On the contrary, enhanced customer due diligence in banking is performed when the financial risks of money laundering, corruption, tax evasion, and terrorist financing are high. It involves high-risk customers residing in high-risk areas, and they can be asked for additional identification information. Enhanced due diligence process for banks will ensure that larger funds, assets, and transactions are duly vetted to minimize the risk of crimes and regulatory penalties, consequently. Here customers are screened against Politically-exposed person (PEP’s) lists, government-issued sanctions, and blacklists.

 Beneficial Ownership & AML Compliance

A financial institute or fund managing entity also needs to identify the ‘beneficial owner’ of respective assets and accounts in question. This kind of authentication is necessary because in many cases customers that show up at a front desk are actually acting on behalf of another person in a particular transaction. This kind of transactional behavior is showcased because the beneficial owner wants to conceal their identity. This protocol of customer due diligence in banking requires you to establish the ownership structure of a company, and partnership.

To have a wider understanding, a typical beneficial owner is a person who carries out the transactional activities on behalf of the original owner. So to ensure the customer’s identity and remove any doubts customer due diligence in banking is the step forward. This kind of cautionary behavior might not seem appropriate for businesses as they may consider the customer due diligence process as burdensome but this is your best chance to prevent yourself from becoming an unwanted participant in money laundering.

 

Shufti Pro is a perfect solution for banking organisations and financial institutions that are looking to adopt AML Compliance in addition to customer due diligence. We offer an artificial intelligence-based SaaS product that not only provides AML compliance but KYC services as well to make the entire process of customer onboarding and transaction monitoring hassle-free for businesses around the globe.

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The United Kingdom implements new Anti-Money Laundering regulations

The United Kingdom implements new Anti-Money Laundering regulations

The United Kingdom’s finance and economics department has announced the incorporation of new Anti-Money Laundering (AML) regulations. The extra measures would diminish the chances of money laundering and other crypto-related crimes, according to the UK Finance and Economics Department. In a speech on March 6, the Director of Retail and Regulatory Investigations, Therese Chambers, stated that the new Money Laundering Regulations places the UK’s Financial Conduct Authority (FCA) as the Anti-Money Laundering supervisor for some crypto aims. 

Storm-7 Consulting tweeted regarding the news:

She further stated that the new regulations go beyond the 5th Anti-Money Laundering Directive (5AMLD) and encompass a wider set of activities, including initial coin offerings or ICOs, as advised by FATF the last year. The 5AMLD was implemented by the European Union last Summers and it was effectuated in January 2020.

According to Chambers, virtual currencies allow anonymous financial transfers. The FCA’s regulatory supervision mainly aims towards business dealings within the virtual space. The new regulations concern crypto exchanges that extend fiat pairings and deal in crypto pairings as well. Wallet service providers are also included. According to Pawel Kuskowski, the CEO of Coinfirm, the new regulations indicated that crypto can no longer be closed by banks. 

FCA risk assessment, customer due diligence, transaction monitoring, record-keeping as well as suspicious activity reporting are some of the things that crypto firms should possess to conduct business. Many Crypto firms have started evacuating the United Kingdom and European Union due to their ongoing stringent regulations.

The EU passed new Anti-Money Laundering regulations in July 2018, called the 5th Anti-Money Laundering Directive (5AMLD). The 5AMLD regulations caused various crypto exchanges to leave UK and EU related countries. Two Crypto platforms, Simplecoin and Chopcoin, have closed down their services due to 5AMLD.

Simplecoin indicated that these requirements are against the fundamental motives of cryptocurrencies, such as privacy and decentralization.

Top 6 Trends in Anti-Money Laundering for 2020

Top 6 trends in Anti-Money Laundering for 2020

To enhance the scope of AML compliance, new regulations were brought into force throughout last year. In this demanding regulatory atmosphere, financial institutes are expected to adapt to the needs of evolving and competitive financial ecosystems.The key concept of 2020 for AML compliance is the investment in the collaboration of credible data, human intelligence, and advanced technology. So far many achievements in this regard proved to be just a tip of the iceberg but 2020 is expected to be a fruitful year to witness real enhancements in this field. AML practices are required by businesses across the globe to perform customer due diligence.  It is not an uphill task as it may seem. It is an investment of a few thousand dollars to demit the loss of millions. 

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.

Five solutions to tackle business verification challenges

Five Solutions to tackle business verification challenges

Know Your Customer (KYC) is critical for verifying the clients before doing business with them, but to authenticate businesses is as important as KYC for individuals. This is why regulators are increasingly focusing on business verification to help prevent money laundering and terrorist financing. Business verification, which includes authentication of businesses, UBO identification, and risk assessment of business entities, is been included in the new AML directive of the European Union, as well as other major regulatory authorities. Know Your Business (KYB) services market is projected to grow $11.8 billion, according to an OWI lab report.  

Corporate KYC isn’t just a regulatory requirement it helps businesses in identifying the shell companies and other corporate structures involved in illicit funds transfer. The disruptive technologies like artificial intelligence, machine learning, and automation are creating opportunities for quick and real-time customer due diligence and KYC verification. However, many of these solutions focus on KYC for individual and retail customers.

Verifying businesses in the past has been a difficult and time-consuming task. Normally the KYB process for financial institutes to verify the corporates involves manual checks and physical verification, which makes it more tedious and lengthy. 

Challenges associated with business verification

With the new KYC/AML regulations, business is required to verify customers, corporate clients, and other critical information. However, there are multiple challenges when verifying a business client and some of them are:

Time taking manual onboarding process

Normally, KYB verification for corporate onboarding is a tedious and manual process, requiring intensive labour. These delays lead to frustrating customer experience and customers are more likely to abandon the account creation process. Moreover, there are chances of errors and mistakes when it’s done manually.

High compliance cost

According to a report, the average KYC cost for businesses crossed $48 billion in previous years. This includes manual labour and third-party payments. All this is raising concerns about AML and KYC compliance costs becoming so high that they prevent businesses from being able to perform other daily tasks.

Complex ownership structure

Latest KYC/KYB regulatory directives such as AMLD5 and FinCEN CDD rules make it necessary to verify and identify the business entities as a mandatory regulatory requirement. Financial institutions are reliant on collecting business details from clients through a manual process by filling in forms and then verifying the information manually. There are high chances of data discrepancies to slip in.

Data inconsistencies

While companies could somehow afford all manual works but a problem that still persists is data verification sources. There are many sources where companies’ data can be found, and sometimes the information available on some file is outdated or incorrect.

Addressing the challenges

With an increase in regulatory requirements, there is a need for developing an appropriate procedure and process that facilitate financial institutes. Here are some solutions that could help businesses: 

Automated KYB onboarding

By employing the latest technologies, automated business verification solutions can solve these problems. AI-powered corporate verification solutions will provide an opportunity to enhance the efficiency of the corporate onboarding process, by reducing the cost and making it faster. 

Ongoing monitoring for business verification

Businesses should monitor their corporate clients regularly to identify and monitor any changes in the company’s structure, the appointment of new executives, and changes in beneficial ownership. This practice also helps in monitoring PEPs continuously. It will assist companies in adopting a structural approach for business verification.

Access to authentic business registries

 As discussed earlier, access to the correct and most updated data is a challenge in performing business verification. However, if the companies have access to the correct and most up to dated business registries is valuable and will make business compliance an easy task.

API integrated KYB solutions

Shufti Pro’s API integrated solution aggregates data from various sources, so businesses only need to enter the required details such as the business registration number and the jurisdiction code where the business is operating. This centralized verification help manage the complexity involved in onboarding and monitoring corporate clients.

Virtual Identification

With an increasing compliance cost, businesses are now turning towards automated software that helps businesses to perform necessary business checks. Shufti Pro’s KYB verification solution is specifically designed to reduce extra compliance costs and dealing with complexities involved in working with high-risk clients.

As the global business markets are growing at an increased pace, companies need to get grip on customer due diligence for both individual and corporate clients.

6AMLD of EU - A Detailed Insight

6AMLD of EU – A detailed insight

European union’s another anti-money laundering directive is in the pipeline. And this time the union is aiming for uniformity in AML/CFT practices across member countries while keeping up with changing international regimes.

The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion. And in the EU money laundering accounts for up to 1.2 % of the EU’s annual GDP, or around $225.2bn (€197.2bn) in 2018, according to a 2017 report by Europol.

Recently the 5AMLD was implemented on 10 January 2020. The fifth directive mainly targeted loopholes in certain sectors. It addressed the loopholes in prepaid cards, virtual assets, and precious metal dealing. The major change that came due to 5AMLD is that the identity verification threshold for prepaid cards is reduced from €250 to €150. This threshold for remote transactions is €50. 

Now the 6AMLD is in the next big change in the AML/CFT regimes of the EU. The member states are required to integrate the new directive into their national laws by December 2020 and the reporting entities are required to completely implement the new laws by June 2021. The new directive is drafted well to close any left loopholes in AML/CFT regulations.

Key Features of 6AMLD

The 6AMLD is not only about fulfilling minimum regulatory requirements but about changing the attitude towards AML/CFT. The reporting entities need to go another mile to play their role in eliminating money laundering.

Key Features of 6AMLD

1. A list of predicate offences

A list of 22 predicate offences is provided in AMLD6. It includes offences related to environmental crime, cyber crimes, tax crime, and self-laundering. The directive includes ‘aiding and abetting’ and ‘attempting and inciting’, which means that criminal liability will be extended to people or businesses that are used in the criminal offence. Businesses will be liable for penalties if money laundering is channeled through their system due to a lack of preventive measures. 

The offenses are clearly defined in the official journal of the 6AMLD. The reason behind this measure is to create uniformity in the AML/CFT measures of member states. Because lack of uniformity is one of the major reasons behind money laundering scandals in EU member states. 

2. Increase in non-compliance penalties

The 6AMLD has clearly defined the penalties for businesses and individuals. 

Natural persons 

The individuals involved in money laundering are called “natural persons” in the 6AMLD. Non-compliance penalty is increased for the natural persons. Now a sentence of four years is non-compliance penalty, it was one year previously. As mentioned in the official journal

In order to deter money laundering throughout the Union, Member States should ensure that it is punishable by a maximum term of imprisonment of at least four years.”  

Also, the monetary fine is increased to five million Euros. 

Legal persons 

Businesses are described as “legal person”. In case a business is found to be a part of a financial crime due to lack of AML measures or negligence it will be liable for these below-mentioned penalties:

  • Exclusion from entitlement to public benefits or aid
  • Permanent or temporary disqualification to perform commercial activities
  • Judicial winding up
  • Temporary or permanent closure
  • Placed under judicial supervision

3. “Aiding and Abetting” and “ inciting and attempting” 

The scope of AML regulations is increased to” aiding and abetting” and “ inciting and attempting”. The 6AMLD official journal clearly states, “Member States shall take the necessary measures to ensure that aiding and abetting, inciting and attempting an offence referred to in Article 3(1) and (5) is punishable as a criminal offence.”

4. Alignment with international laws

The Journal states that the member countries are required to implement the 6AMLD while keeping their AML/CFT laws aligned with international laws. It will increase transparency in financial infrastructure. 

This means the reporting entities (businesses/ legal persons) will be required to follow the new regulations that will be aligned with international regimes.

5. FATF recommendations EU AML laws

The 6AMLD will require the member countries to align AML laws with the FATF recommendations. The tax crimes are defined as a criminal offence and the preventive measures are required to be designed in light of revised recommendations of FATF. 

6. Not missing on the virtual currencies

The sixth anti-money laundering directive requires the member countries to take concrete steps towards elimination of risk coming with these virtual assets. The reporting entities such as crypto exchanges, digital asset exchanges, cryptocurrency dealers, crypto wallet providers and businesses accepting cryptocurrency payments will be facing some major AML/KYC compliance scrutiny in 2021. 

How businesses should prepare for the change?

The ultimate effect of changing regimes is on the businesses. The new directive is drafted to change the perspective of businesses towards AML/CFT compliance. The new regulations of “Aiding and abetting”, and “ inciting and attempting” have changed the compliance requirements. Businesses will be liable for heavy penalties if they’re found to be involved in the criminal offence. Even if they’re used as a tool or a channel. 

The reporting entities are required to have an in-depth understanding of the risks and threats and to take necessary steps to eliminate the risk of any of the listed criminal offences being channeled from their platform. 

The businesses are expected to have a completely updated setup for compliance requirements. Digital identity screening could prove to be a reliable partner of the businesses in this regard. As it provides global coverage in the screening of individuals and businesses it helps reporting entities maintain a global risk cover against bad actors.

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6AMLD of EU – A detailed insight

AML solutions: Eliminating the risks of money laundering

AML Solutions: Eliminating the Risks of Money Laundering

Money laundering is a serious crime that can have serious and long-term consequences for your business. Oftentimes, small business owners are offered business opportunities that they can’t simply pass up. It looks like easy money, so they accept and start serving as a facilitator for money laundering. According to a PwC survey, global money laundering transactions account for roughly $1 trillion to $2 trillion annually or 5% of global GDP.

What is money laundering?

The basic concept of money laundering revolves around transforming dirty money into clean money or in a more formal way, money laundering is the process of making a large amount of money generated through illegal activity appear to have earned through legitimate sources. 

Money laundering is typically done through 3 steps: placement, layering, and integration. 

  • Placement is to put illegal money into a legitimate financial system such as a bank
  • Layering is to mask the source of money through a series of transactions and bookkeeping techniques
  • Integration is to withdraw laundered money from a legal account and utilize it

Know more about money laundering process in this demo:

The money laundering is generally accomplished through currency exchanges, wire transfers, smurfing, and shell companies. Moreover, the globalization and digitalization have expanded the capabilities of money launderers, making it more difficult to identify the source of the transaction. Online banking, P2P services, money exchange businesses, and now cryptocurrency have made it difficult to detect the illegal transfer of money. 

However, laundering money is a serious offence. It could lead to heavy fines, penalties and even jail time. According to International Comparative Legal Guide, the maximum penalties for laundering money are fines up to $50,000 or double the amount of property involved, whichever is greater, and imprisonment up to 20 years for each violation. 

Risk of money laundering for small businesses

Small businesses are often the victims of money laundering. Criminals target small businesses because the owners of such businesses lack experience and knowledge about the risks involved with a certain type of business dealing. Further, they don’t have allocated resources and knowledge about Anti Money Laundering (AML) compliance.

Protecting your business against money laundering

By adopting anti-money laundering solutions and practices, you can protect your business from money laundering threats. 

What is Anti Money Laundering?

Anti-money laundering or AML is a methodology or a policy that governs: how the company monitors transactions, detects and reports financial crimes to the regulatory authority. For this purpose, companies adopt different AML solutions that screens and tackles money laundering risks, which the company faces or could face in the future.

AML compliance was first coined with the formation of the Financial Action Task Force (FATF) in 1989. The main concept for its formation was to devise international standards to prevent money laundering and to promote these standards.

In past AML laws has been slow to catch up with cybercrimes, since most of the AML solutions were deployed for traditional banking institutes. However, amid the digital transformation, FATF and other regulatory authorities started focusing on digital transactions and devised stringent regulations to prevent money laundering using digital platforms.

To follow and comply with these regulations, businesses need AML solutions that could detect suspicious transactions and perform due diligence during the onboarding process.    

Automated AML solutions for enhancing AML process

Artificial intelligence and machine learning have been transforming different operational sectors in the finance industry. Automating the tasks that involve data processing and analyzation, filtering out false alerts, and identifying complex criminal conducts are some of the tasks that are being automated using artificial intelligence. To prevent money laundering, banks and other financial institutes use AI-driven AML solutions. These systems are used to identify and categorise suspicious transactional activities.

AI is deemed crucial for performing repetitive tasks while saving time, resources and efforts, which can be reallocated for other tasks. Natural language processing and machine learning are usually adopted for automating AML screening tasks. 

6 Ways AML Solutions can prevent Small Businesses from Money Laundering

Here are ways in which AI-driven AML solutions have revolutionised customer and business screening.

Enhanced due diligence

Artificial intelligence automates the enhanced due diligence process. It starts by taking steps to ensure you know who you are dealing with, understanding and monitoring their transactional activities and accessing their risks of money laundering.

Monitoring transactions and activity

AI-powered risk-based solutions and procedures help monitor ongoing customer activity to detect fraud, as well as money laundering activities including but not limited to placement, layering, and integration of funds.

Reviewing odd patterns of transactions

In most of the cases, launderers use hundreds of different accounts to perform small transactions that can easily surpass without being detected. While it’s difficult for humans to identify such transactions, automated AML solutions can easily identify such smaller transactions and reveal a pattern of illegal activity related to money laundering or terrorist financing.

Identifying Politically Exposed Persons (PEPs)

PEPs compliance is mandatory for firms. It is crucial to identify the risks associated with your customers. According to FATF, any person who is or has been holding any public office or function is a politically exposed person and to do business with any such entity, organisations should perform enhanced due diligence and monitor their ongoing transactional activities.  

Money laundering is a serious risk for small businesses. In addition to facing criminal charges and hefty fines. Involving in money laundering activity intentionally or accidentally could lead to fines and may damage your brand reputation. With this in mind, small business owners need to study and comply with AML regulations. 

FATF-shaping-business-world

40 recommendations of FATF – Shaping the future of your business

Financial Action Task Force or simply FATF is an active global authority that never fails in surprising the world. It’s always in the process of finding loopholes in AML (Anti Money Laundering) or terrorist financing regulations. 

If you think the FATF recommendations are none of your business then your business might be in a grave situation. Let’s see how. 

History of FATF

FATF was formed in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering and drug trafficking. But later, after 9/11 in 2001, the authority also incorporated terrorist financing in its efforts to mitigate the financial crime. Then in 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

The primary motives of FATF are to mitigate the crimes that may prove to be a threat to the global financial infrastructure. In an effort to achieve this goal, FATF aims at developing and promoting effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing, and other such threats to a sound financial infrastructure. 

The primary goal behind all these crimes is monetary gain and FATF plans to close all the loopholes in the global financial infrastructure that might be used by criminal entities. So it is significant for governments to take these regulations seriously. Once your government takes FATF seriously, trust me you should be careful too.  

Members of FATF and Affiliated bodies 

FATF has 39 full members and one observer member, Indonesia. Recently Saudi Arabia became a full-time member of FATF after being an observing member for some time. On the other hand, Pakistan and some other countries are thriving to become a member of FATF and remove themselves from blacklist or grey lists of FATF. 

Other than countries, FATF also has some organizations as associate members and observing organizations. 

A brief of 40 recommendations of FATF

1- Identify financial crime threats prevailing in the existing policies and systems of a country. 

2- Draft and implement policies and procedures in the financial infrastructure of the country to counter threats highlighted in the previous stage. The policies should be drafted to prevent crimes such as money laundering, terrorist financing, drug trafficking, and weapon trading. 

3- Design risk preventive measures for financial institutions and other reporting entities to comply with. These preventive measures are designed in agreement with AML and CFT (Counter Financing of Terrorism) recommendations of FATF. These preventive measures include record keeping, transaction monitoring, customer due diligence, AML screening of customers, etc. 

4- The concerned law enforcement entity of the country must be equipped with powers and authority to implement laws and keep an eye on the reporting entities while taking risk prevention measures. 

5- To practice accountability at all levels within a system. To maintain a fair judiciary in the country.

How the recommendations of FATF affect your business

The ultimate entity that is affected by the regulations of FATF is the business community. And among all, the financial sector is the one that is exploited the most by financial criminals. Other industries affected by the recommendations of FATF are, Fintech, E-commerce, legal, precious metal dealers, art dealers, real estate, etc. 

The common AML/CFT regulations implemented on businesses as per the recommendations of FATF are: 

  • Performing due diligence on the customers
  • Performing AML screening on businesses (in B2B relationships)
  • Keeping a record of the customer data
  • Maintaining a compliance department
  • Reporting suspicious transactions of customers to the concerned authorities
  • Performing AML screening on the UBOs (Ultimate Beneficial Owners) in case of serving business as a client

So it is clear that the effect of AML regulations is two-fold. First, the country regulations and policies are drafted in light of these recommendations, then these regulations are implemented on the reporting entities. It might be businesses or government authorities. 

Compliance is not an option 

No matter if you’re a startup or enterprise if your industry is in the list of reporting entities, you must comply with the AML regulations. 

In case some new recommendations are given by FATF, reporting entities are affected by the new changes in their local regulations. For instance, the new regulations of FATF issued in 2019, for the cryptocurrencies, art dealers and legal professionals will affect these businesses in member states and observing members. 

Operating in FATF member country means more growth opportunities

Being a member of FATF is not an easy task. Countries that are referred to as complete members are considered as low-risk countries so the businesses operating in those countries are more likely to have growth opportunities. Businesses and investors prefer low-risk regions for business. 

On the other hand, the companies in grey/blacklist are considered as high-risk entities. So if your country is trying to implement FATF regulations then it will bear high profits for your business once it is a member or out of grey list of FATF. 

FATF regulations are implemented globally  

The AML/CFT regulations of FATF have a global impact. If your business is originated in a non-member state, you’ll be required to follow the stringent AML regulations while operating in a member state. 

As FATF plans to eliminate financial crime at a global level, the scope of its recommendations is also global. So, businesses have no other option but to take concrete steps to prevent financial crime risk. 

How automated AML helps in swift verification of your customers along with quick compliance

Automated AML screening conducted through Artificial Intelligence (AI) is an easy way to get done with stringent AML/CFT regulations. The AML regulations are becoming stringent with every passing day and it is not an easy task to conduct manual verifications on customers coming from every corner of the world. 

On the other hand, now FATF has also issued the first draft of digital ID system guidance so it means the regulatory authority is giving due significance to automated screening solutions. Now is the right time for businesses to avail this opportunity and share their compliance burden. Outsourcing an AML screening solution will share half of your compliance burden.

To wrap up, FATF is in a continuous process of financial crime mitigation in the world. It is expected that more countries will either become members or observing members of FATF to gain credibility in the global trade. It is high time your business should opt for compliance benefits over non-compliance penalties. 

danske to face 2 billion fine for money

Danske to face $2 billion fine for money laundering

According to Jyske Bank, Danske will probably be fined around 13.5 billion kroner (around $2 billion) over the money laundering case by authorities in Denmark, the USA, and the UK, as the investigations in Europe’s biggest money-laundering scandal draw to a close.

Danske Bank was previously indicted for suspicious transactions of 200 billion euros at there Estonian unit. The Denmark-based bank is cooperating with probes by the U.S. Department of Justice and U.S. Securities and Exchange Commission, among others. Another writ, which was filed on December 27th, 2019, in the district court of Cophengan by law firm Nemeth Sigetty, is for about 1.5 billion kroner, according to a statement.

Penalties tied to investigations will drive up Danske’s operating expenses to 42.4 billion kroner this year, according to an analyst at Jyske Bank. The costs are expected to return to normal next year.

As Danske Bank released the full dimensions of laundering scandal in September 2018, it’s shares have taken a beating. It now trades at large discounts to peers and Jyske, which recommends buying the stock, says the current price more than incorporates the consequences of the money-laundering scandal.

e kyc services

e-KYC services introduced in Malaysia by InstaREM

Residents and expatriates in Malaysia can now make overseas payments safely and regularly through digital Know Your Customer Services launched by Singapore based company InstaReM. This zero-margin remittance service is going to facilitate hassle-free onboarding and provide cost-effective solutions. 

An e-KYC framework was established for remittance companies in 2017 by the Bank Negara Malaysia (BNM), Malaysia’s financial regulator. Since then, InstaReM has been a pioneer in digital cross-border remittance FinTech and is now powered by the NIUM payments platform.

Previously, customers faced challenges in complying with KYC norms through traditional methods. Tedious and time-consuming processes have led to high drop-off rates in the past. 

With the digitization of identity verification, they can now just log in to their account and upload required documents and photos to make transfers to over 60 destinations. It can be done from the comfort of their homes and offices with a simple smart device. The customer onboarding process is therefore made painless and transparent. 

Financial institutions need to implement such solutions at a large scale in order to authenticate and validate customers with swift onboarding solutions. This will improve risk assessment and fulfill legal compliances with KYC and AML regulations. Long term goals also include combating money laundering and terrorist financing. 

Having raised $59.5 million in initial rounds of funding, InstaReM claims to be the only company providing low-cost e-KYC services in more than 60 countries and caters to financial institutions, SMEs and individuals. This initiative is part of their effort to improve efficiency in financial service delivery and provide supplemental services to traditional banking.

AML compliance checklist for efficient AML screening in 2020

AML compliance checklist for efficient AML screening in 2020

2019 brought a plethora of AML regulations for businesses and non-compliance is no more an option in 2020, it’s an obligation. 

When AML compliance is inevitable, let’s see how it can be performed smartly to get efficient results. This checklist will help businesses thinking about compliance and those who want to update their compliance operations in 2020. 

The amount of globally laundered money is about 2 – 5% of global GDP in one year (report of the United Nations). And the report of the Financial Conduct Authority (FCA) stated that at least £100bn was laundered through the UK. The need for an efficient and constructive AML compliance is inevitable for global business entities. 

Efficient AML compliance is practicing obligatory scrutiny on customers while adopting a data-centric approach in collecting and analyzing customer data to gain useful risk-management insights. The customers’ data collected through automated due diligence solutions should be used to perform customized risk management and to assign customers a realistic risk rating. 

In short efficient AML compliance brings in several other benefits apart from eliminating non-compliance penalties. It helps businesses onboard secure clientele, develop transparent B2C and B2B relationships, improved brand reputation and market value.

AML Compliance Checklist - Infographic 2020 

2019 changed the facet of Global AML Regulation

2019 was a very unpredictable year when it comes to AML/KYC regulations. The global regulatory authorities drafted some strict AML regulations and also increased the scope of those regulations. Several new industries were also added to the scope of global AML regulations. 

FATF took a revolutionary step and issued a digital ID systems guide for the reporting entities to utilize when performing digital identity screening on their customers. The draft of the digital ID system is issued for edits from the stakeholders and it is expected to motivate businesses to move towards automated AML screening of their customers.

On the other hand, the European Union (EU) amended the Fourth Anti-Money Laundering Directive (AMLD4) and published the AMLD5 in the official journal of the EU in June 2018. It increased the scope of the AML regulations to the virtual assets sector, prepaid cards, and real estate sector. The identity verification threshold for the prepaid cards is reduced to EUR 150 from EUR 250. Also, the identity verification threshold for remote payments is set at EUR 50. 

Also, AUSTRAC, the U.S treasury, and the UK regulatory authority introduced new regulations and expanded the scope of the current AML regulations. Read more about these changes in this blog.   

AML/KYC – how 2019 changed the landscape of global regimes? 

Although the regulations changed a lot, the primary compliance requirements are the same in global regulations and they are mentioned below. But these are just the requirements following which would just be compliance and following these regulations smartly will help in efficient and productive AML compliance in 2020. 

Five Components of AML Compliance

Below are the primary components in global AML/KYC regimes, implemented by authorities such as FATF, FinCEN, FINTRAC, FINMA, etc. 

Policies, Controls and Procedures

The policies, controls, and procedures of the company must be aligned with the AML regulations. Ensure that the due diligence, customer verification, record keeping, risk assessment, and reporting operations of the company are aligned with the regulations. The AML regulations changed a lot in 2019 and the businesses must align their compliance procedures with the changed regulations. 

Awareness and Traning of Employees

It is important to train the employees at all hierarchical levels to comply with AML regulations. Making compliance a habit of the employees is important. A sense of accountability must be maintained at all levels. The Danske bank scandal which shook the financial world also happened due to a lack of accountability at an executive level.  

For efficient AML compliance train your employees regarding the changes in the regulatory framework and how they should play their part in making the company fraud-free. As efficient compliance is possible with a team effort from all the employees. 

Record Keeping

A proper updated record of customer information and AML screening must be maintained in a secure manner. In some regulations, it is to be maintained for five years even after a relationship with a client is ceased. 

For efficient AML screening, this record must be used to predict the future prospects of the company and assign customized risk ratings to the customers. 

Customer Due Diligence (CDD) 

The most important part of AML regulations is the verification of the customers and business entities related to your business. For customer due diligence the basic identity verification along with AML screening must be practiced. The customers must be verified against watchlists, sanction lists, and PEPs lists. 

For efficient AML compliance, don’t just verify the customer against domestic watchlists but practice global risk prevention and verify the customers against global watchlists. 

Reporting

Reporting is a crucial part of AML compliance. It includes reporting the unusual transaction that is above the predetermined threshold made by your customers. It helps in mitigating the unpredicted risk coming from businesses. It increases the credibility of a reporting entity. 

Devise efficient AML screening in-house protocols to keep an eye on the transaction of all customers and especially the high-risk entities. 

AML Compliance Checklist for efficient AML compliance 

Digital AML compliance solution helps in automated AML screening of prospects. And also shares the customer screening burden of the reporting entity. Below is the AML compliance checklist to experience efficient AML compliance in 2020 with the help of an AML screening solution. 

Practice global coverage in Customers Verification

In order to practice enhanced due diligence, the businesses must perform global AML screening on their customers. While onboarding a global clientele it becomes difficult for the businesses to practice AML screening on people coming from different corners of the world with ID cards in different languages. 

An AML screening solution helps in performing global AML screening on individuals. And on the businesses as well, so helps you stay one step ahead of fraudsters and also competitors who stick to minimum AML compliance requirements. 

Ongoing monitoring of customers

Performing customer due diligence is mandatory but it is required to be performed only at the time of onboarding a customer. On the other hand, efficient AML compliance is not limited to just minimum protocols so perform AML screening on your customers (especially the high-risk entities) at regular intervals. The risk status of a customer could change anytime. Ongoing AML screening of customers helps in identifying the in-house risk. 

Perform verifications but with Security

Not only money but the personal credentials of your customers are also an asset that needs to be protected from hackers. So be sure that the customer data is in safe hands. Also, AML regulations come with data protection laws. The GDPR (General Data Protection Regulation) in the EU and CCPA (California Consumer Privacy Act) in the U.S are some common data protection regulations imposed on businesses collecting the data of their customers. 

Using the AML screening solution that complies with the GDPR regulations also share the burden of data protection regulations. 

Proactive risk management through valuable risk insights about your prospects

The valuable insights about the prospects (individuals and businesses) help in crafting a proper risk management framework. For example, the nationality verification helps in deciding whether a customer should be verified under CDD or Enhanced Due Diligence (EDD). 

A customer could claim to be from a low-risk country, ID card screening and AML screening against global watchlists will ensure that the person is actually who he claims to be. 

Record keeping through Intuitive back office

Record keeping is important for reporting entities. A digital AML screening solution reduces the burden here as well with the help of an intuitive back office. The verification proof of real-time verification is stored in the back office and it can be used to practice efficient AML compliance on your platform. These proofs help businesses in proving that they actually performed verification on a certain customer.

The world is changing and businesses need to move towards automation to perform their compliance operations in a smart manner. Following the minimal regulations is no more enough. Businesses need to take voluntary steps towards AML screening of their customers to practice efficient AML compliance in 2020. Following the above-mentioned AML compliance checklist will help in proactive fraud prevention and unlocking more growth opportunities.

British Columbia Makes Regulatory Change to Combat Money Laundering

British Columbia Makes Regulatory Change to Combat Money Laundering

The British Columbia government is providing the gambling regulator of the province more independence to establish and ensure regulatory policy in order to combat money laundering. 

According to the government, the gaming control and enforcement branch will be transitioned to a new independent gambling control office. The new office will focus solely on regulatory policy related to gambling, horse racing and responsible-gaming programs. 

Until this initiative, the branch has enforced policy while also providing advice to the province on business matters involving the British Columbia Lottery Corp. 

Attorney General of British Columbia, David Eby, said the change addresses concerns raised by former RCMP (Royal Canadian Mounted Police) officer Peter German in a report for the provincial government. The concerns were about the dual responsibility and how it could give rise to conflicts of interest and impede anti-money laundering measures. 

Eby expects the change to be effective and says, 

“The IGCO will have the mandate, authority, and independence to ensure the overall integrity of gambling in B.C. This change will make it far easier to keep dirty money out of our province.”

American Gaming Association Updates Best Practices for AML

American Gaming Association Updates Best Practices for AML

The American Gaming Association (AGA) has released updated “Best Practices for Anti-Money Laundering (AML) compliance for the year 2019-2020”. The update reflects on the industry’s continuing commitment to AML compliance and guides casinos’ efforts to protect the US financial system from money laundering and other related financial crimes. 

The gaming industry became the first industry to collectively establish a complete set of best practices for AML compliance in 2014. The Best Practices along with the AGA’s Bank Secrecy Act (BSA) compliance efforts have been lauded by the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). 

The updated Best Practices contain a more comprehensive risk assessment section as well as enhanced Know Your Customer (KYC) and Customer Due Diligence (CDD) measures. The update is based on FinCEN’s guidance and enforcement action takeaways, the Treasury Department’s National Money Laundering Risk Assessment and the Office of Foreign Assets Control’s updated compliance guidelines. 

The president and CEO of AGA, Bill Miller, said, 

“As one of the most highly regulated industries in the United States, it is imperative we take every possible step to discourage illicit behaviour and safeguard the integrity of the casino industry. Through our ongoing partnership with FinCEN, the Treasury Department, and law enforcement, our industry continues to be a leader in compliance.”

 

EU’s AMLD5: What does it mean and how will it impact the AML regulation regimes?

EU’s AMLD5: What does it mean and how will it impact the AML regulation regimes?

From the Panama papers, Paradise leaks and Danske Bank case to the most recent revelations about SEB bank, money laundering scandals over the last few years have taken the world by storm. As general awareness about money laundering strengthened, so did the pressure on the regulatory authorities across the globe to counter build proper anti-money laundering laws and regulations

With every new revelation, lawmakers gain a great insight into how the financial system can be exploited and, as a result, find better ways to devise new amendments in already existing laws.

This is one of the reasons why the European Commission proposed the 5th Money Laundering Directive only a year after the legalization of AMLD4. Although published in the official journal of the EU in June 2018, AMLD5 was originally proposed in July 2016 as a part of its action plan against terror financing and money laundering, after the Paris and Brussels attacks, and as a reaction to Panama paper published in 2016.

The primary intention to make changes by January 2017 looked over-aggressive; a final devised text was reached in December 2017. 5th Money laundering Directive came into force in July 2018, and member states are required to make amendments in national laws accordingly before 20th January 2020.

What are the Key Changes in the 5th Anti Money Laundering Directive? 

AMLD5 serves greater prospects and shows the European Union’s leadership role in AML legislation. One of the key features of AMLD5 is that it proposes changes in already existing legislation in AMLD4, instead of replacing them.

The precise amendments that the fifth directive proposed are:

  • The scope of money laundering screening is extended to virtual currency providers, art worker traders, e-wallet providers, and tax-related services.
  • European member states require to develop a list containing all public offices and its functions nationally that qualify as politically exposed (PEP) for enhanced due diligence.
  • Financial flows from high-risk non-European states are subjected to high due diligence.
  • AMLD5 makes it obligatory to consult beneficial ownership registers while performing AML screening.
  • The directive also recommends that access to beneficial ownership information for EU based businesses should be made publicly accessible. In AMLD4, this information was not publicly accessible.
  • It also ends the anonymity of saving accounts and safe deposits across all the banks under the European Union.
  • Information on real estate holders is to be made centrally available to public authorities across Europe.
  • The payment threshold for prepaid cards and e-money is to be lowered. Previously, the threshold was a maximum of 250 euros. AMLD5 requires this threshold to be lowered further to 150 euros.

What are the Key Changes in the 5th Anti Money Laundering Directive?

Following the spirit to become AML leaders in the world and to stop money laundering across Europe, the European Commission requires member states to implement these changes in national laws by January 20th, 2020. And as the deadline imposed by the EU ends almost in a month, let us have a deep dive into how it will impact the AML regulations landscape for businesses across Europe.

How will AMLD5 impact Anti Money Laundering Regulation Regime?

Virtual Currency Service Providers in Scope

Since the virtual currency is the talk of the town for a while now and regulators are finding ways to regulate decentralized cryptocurrencies such as bitcoins, AMLD5 will apply to virtual currency service providers as well as electronic wallet providers, to cover the risks associated with cryptocurrencies. In addition to this, the traders of artwork and entities rendering tax-related services are also in the scope of AMLD5 regulations.

Enhanced KYC including access to Beneficial Ownership Information

The business across Europe are obliged to consult related registers while performing KYC. However, for now, it is only applicable to the businesses registered and operating under the European Union.

Public Access to Beneficial Ownership Information

AMLD4 required the member states to maintain central registers for beneficial ownership information and required interested parties to demonstrate legitimate access to beneficial ownership registers. Under the AMLD5, this information is to be made publicly available except for trusts and similar legal arrangments. 

In such cases, legal information about beneficial ownership will be granted to anyone demonstrating a legitimate interest. The beneficial ownership information will be comprised of; the name of the beneficial owner, date of birth, nationality, country of residence, and the extent of the beneficial interest held in that particular business.

Access to Information on Real Estate Holders

Money Laundering through real estate is estimated to reach $1.6 trillion a year. Owing to this, the AMLD5 makes information on real estate holders, available to the public authorities. This does not require to maintain a central register for the information.

Lower Prepaid Card and E-Money Threshold

Prepaid cards are being used in money laundering across the globe. According to the FBI, drug cartels utilize prepaid cards to launder illegally earned money from drug sales across the United States. For identifying prepaid cardholders, AMLD5 lowered the threshold of prepaid cards from 250 euros to 150 euros. Furthermore, E-money transactions using prepaid cards are lowered to 50 euros. 

No member state is allowed to increase this amount, however, these amounts can be lowered further. AMLD5 not only lowers this amount but also includes strict restrictions on anonymous prepaid cards issued in non-member countries.

Regulations for Bank Accounts and Safe Deposit Box

One of the stricter regulations in AMLD5 is the abolishment of the anonymity of bank accounts, saving accounts, and safe deposit boxes. Member states are obliged to design central registries or data retrieval systems by September 10, 2020, which will be directly accessible by the Financial Intelligence Units and competent national authorities.

Once the directive is transformed into legislation, the financial institutions will require to build or render digital KYC services for the onboarding process and it is important for the financial institutes to attain clear guidance on this directive and formulate strategies accordingly.    

bank of ghana

Bank of Ghana to Introduce Digital Currency in ‘Near Future’

The Governor of the West African nation’s central bank, Ernest Addison, announced the news of Ghana’s plans of digital currency at an annual banking conference last week. Addison said that the central bank is in discussion with ‘key stakeholders’ to explore a digital currency pilot project ‘with the possibility of issuing an e-cedi in the near future’. 

The CBDC pilot initiative is in accordance with the country’s efforts to digitize the financial and banking sector. Through this effort, the electronic payment systems in Ghana such as mobile banking can grow and enhance. Mobile money transaction statistics, for instance, increased to 1.4 billion last year as compared to 982 million in 2017 according to Addison. He added, 

“The digital age provides enormous potential for the financial sector to re-orient itself to satisfy the new consumer and business demands for financial services.”

Addison also announced that the country’s largest bank in terms of total operating assets, Ghana Commercial Bank (GCB Bank) has been authorized to issue e-money. 

Africa is seeing a surge in cryptocurrency with 64 blockchain and cryptocurrency firms available across the continent. These include 11 sub-categories including exchanges, wallets according to research from The Block Crypto. 

The Expected No-Deal Brexit and AML/CFT Laws in the UK

The Expected No-Deal Brexit and AML/CFT Laws in the UK

The current prime minister of the UK Mr. Boris Johnson made a statement that the UK should be ready for no-deal Brexit in 2020. In case the UK is unable to get the Brexit deal done by the end of December 2019, it’ll have to go for no-deal Brexit in January 2020. And the prime minister is all set to get the Brexit done by the end of 2019. In case the Brexit is done, December would be the transition period and the UK will get some time for getting things on the track.

Brexit – A Timeline

In June 2016, the UK voted to leave the EU and then prime minister David Cameron resigned the other day. Since the UK took the initiative of leaving the EU, it’s political infrastructure faced some significant changes including the resignation of the last two prime ministers and the delays in the Brexit day. The latest delay was of 31st October 2019. It was expected that the UK will leave the EU with the deal designed by former prime minister Theresa May but it got postponed and now it is expected to be completed in December or the UK will have to leave the EU with a no-deal. 

What is a no-deal Brexit?

A no-deal Brexit is a scenario that depicts that the EU and the UK were unable to reach a joint agreement on Brexit and the UK would leave the EU immediately without a transition period. The UK will leave the single market and the customs union and will have to follow the laws of the World Trade Organization (WTO). Also, the UK will have to introduce its new regulations for AML compliance and the country will face a major shift in its legal framework. The country will also have to form new trade agreements with neighboring EU countries and might face delays in trade due to this shift. 

No-deal Brexit will have an impact on the seamless implementation of AMLD-5. In case the UK leaves the EU without a deal it will have problems in data sharing that is to be practiced in case of implementation of the AMLD-5. 

What is a deal Brexit?

A deal Brexit is what the UK seems to be struggling for the past few years. It means the UK and the EU will agree on certain “Divorce terms” related to trade, law enforcement, data sharing, immigration, etc. 

So far it seems that the UK will be forced for a no-deal Brexit due to the approaching deadline of the end of December 2019. 

What will be the consequences of no-deal Brexit on the financial infrastructure of the UK?

Nicola Gratteri a public prosecutor in Calabria predicted that Brexit might aid the Italian mafia in pooling in their illegal money to the UK. Shell companies will be the safe haven of criminals to legitimize their cash proceeds from drug dealing, human trafficking, etc. 

AML laws and AML compliance 

The current AML laws of the UK are aligned with the EU. But in case of a no-deal Brexit or a deal Brexit, the UK will have to form its own laws. The only difference is that in case of a no-deal Brexit it’ll have to form new laws quickly as there’ll be a gap between law enforcement and this gap will be exploited by the criminals. 

The businesses in the UK and the EU will have to change their AML/KYC compliance practices as per the requirements of the new laws. The EU countries will be in a transformation period and the businesses will have to follow to cope up with the changing laws. 

AMLD-5 and its implementation

The AMLD-5 is expected to be implemented in January 2020. AMLD-5 increased the scope of AML regulations. The identity verification threshold for the prepaid cards was reduced to EUR 50, in case of remote transactions. 

The UK has always been very keen on implementing AML/KYC regulations in the country. In case the UK leaves EU with no-deal Brexit it’s AMLD-5 implementation will be affected by this shift. It’ll no more be liable for AMLD-5 compliance in its country. But it is also expected that the UK will change its Money Laundering Regulation (MLR) as per AMLD-5 regulations to practice thorough risk prevention. 

The businesses in the UK are now swinging between two scenarios, either they should prepare to follow AMLD-5 in 2020 or not.

Trade friction

Not only this but the UK will face friction in its trade and it will no more be a part of the single market and it will cause regulatory friction. As the UK will not have any transition period to settle things down unless the new laws are formed and implemented properly. 

In case the UK-leaves with a no-deal Brexit it would have the opportunity to make trade deals with other countries without long delays. In case of a deal, the scenario would be the opposite and the UK would follow the EU laws during the transition period. 

How Brexit will impact businesses in the UK and the EU?

Brexit is bound to affect the business community. It is expected that the community will face a plethora of changing regulations while continuing trade in the EU region. The businesses will have to change their AML/KYC compliance practices. In case the EU adopted the AML regulations of the EU, things might become easier for the businesses. 

The AMLD-5 implementation is also a headache for businesses these days as they are uncertain if they should follow the instructions or not. 

The uncertainty in the financial regulatory landscape of the UK is most likely to be exploited by financial criminals looking for loopholes in the regulatory framework of a country. 

How Digital AML/KYC screening will help businesses in the upcoming plethora of guidelines?

Also, the businesses dealing in the EU and the UK will face problems in aligning their AML/KYC compliance practices as per the regulatory requirements in both the regions. The digital KYC solution is designed to cater to the global AML/KYC compliance requirements of businesses. Using a global AML screening solution will help the businesses retain growth even if there is a crisis situation.

Brexit is expected to be completed in December 2019 and it is expected to change the financial landscape of the UK forever. In order to come out of this storm of changing regulations, digital KYC and AML screening solutions will be helpful.

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