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. 

Westpac Freezes Executive’s Bonuses Amid Money Laundering Scandal

Westpac Freezes Executive’s Bonuses Amid Money Laundering Scandal

Westpac’s board will withhold bonuses of all of its senior executives as an ‘interim’ step following the money-laundering scandal. Chairman Lindsay Maxsted will be holding important meetings with investors throughout this week. 

The allegations that the bank breached 23 million anti-money laundering laws were made against Westpac by the Australian Transaction Reports and Analysis Centre (AUSTRAC).  The allegations also include failing to appropriately examine thousands of payments possibly linked to child exploitation.

The bank announced that it will shut down a second service used to transfer international funds. These measures are taken as the bank tries to address the fallout from Australia’s biggest money-laundering scandals. 

Scott Morrison, Australia’s Prime Minister, asked for deep reflection by the bank’s board on the position of CEO, Brian Hartzer. Chairman Mexsted talked to local media on Sunday about the matter and said that letting go of Hartzer would destabilize the bank. 

Talking to The Australian Financial Review he said, 

“We think for Brian not to be CEO would be an amazing piece of destabilization of a company. But we also understand, on the other hand, there is some destabilizing going on, possibly, by him being here.” 

Amidst these allegations, shares in Westpac were down 1.4% on Monday dropping consecutively for the fourth season. Since AUSTRAC’s accusations, Westpac’s cumulative losses have reached $7.6 billion AUD ($5.2 billion). 

AML KYC how changed the landscape of global regimes

AML/KYC 2020 – how 2019 changed the landscape of global regimes?

Copy pasting your 2019 AML/KYC compliance strategy to 2020 plan will not do the job. Businesses need to change their AML/KYC compliance strategy to comply with the latest regulations. 

Anti Money Laundering (AML) and Know Your Customer (KYC) regimes evolved during 2019 on a global scale. Regulatory authorities like FATF, FinCEN, FINTRAC, and the EU government took some rigid steps to make KYC and AML compliance a global phenomenon

Regulatory and supervisory authorities are bringing all the industries under the radar to make AML/KYC compliance inevitable for reporting entities. The Danske Bank and Swedbank scandal made the global financial sector learn the lesson and to take compliance seriously.  Also, the heavy fines charged from non-complaint online businesses like gaming, cryptocurrencies, etc. initiated the trend of AML/KYC compliance among these industries. 

Below is a brief review of some major changes that occurred in KYC and AML regimes around the globe in 2019. 

Fifth AML Directive (AMLD 5) of the EU to be implemented in 2020

EU introduced the fifth AML directive in 2019 which is all set to change the AML compliance in the EU. The businesses are required to comply with this law by January 2020. 

AMLD 5 introduced the amendments for financial institutions, prepaid cards, credit institutions, real estate, legal sector, and virtual currencies, etc. The new directive requires the reporting entities to practice enhanced due diligence. 

The identity verification threshold on remote transactions of prepaid cards was reduced to EUR 50. Also, AMLD5 called for a reduction in the threshold of anonymous prepaid cards – from €250 to €150. Now the prepaid card providers will have to practice customer due diligence on every customer making a transaction or depositing more than €150 in his prepaid card account. This will help the authorities control the anonymous use of prepaid cards for illegal fund transfers. 

Virtual currencies need to apply customer due diligence just like traditional financial institutions. So thorough KYC and AML screening of customers is inevitable for businesses. 

FATF digital ID Systems Guidance

 

FATF took the Regtech initiative back in 2017 by showing a positive attitude towards technological advancements in the financial industry and regulatory framework. 

FAFT issued a guidance paper for digital ID systems. The guidance paper is open to suggestions from the stakeholders. The stakeholders of this guidance are the regulatory and supervisory authorities, businesses and government agencies. 

The guidance provides a brief insight into the process, components and technical standards of digital ID systems. It referred to NIFT Digital ID Guidelines and EU’s EIDAS Regulations

As FATF is a global authority and has several member countries from every corner of the world it is projected to make a huge change in global AML/KYC compliance practices of businesses. 

FATF recommendations for the legal sector, virtual assets

 

In June 2019, FATF gave revised recommendations for the legal sector and virtual assets. Now, these sectors in the member countries of FATF are required to practice thorough AML and KYC screening on their customers. Legal professionals are guided to verify the identity of the Ultimate Beneficiary Owners (UBOs) of the businesses they work with. 

Also, businesses dealing with virtual assets (cryptocurrencies,etc.) are required to perform AML/KYC screening on their customers just like the financial institutions. 

FATF also drafted the recommendations for art dealers, weapon dealers, and precious metal dealers to exercise regulatory compliance. These regulations are drafted to bridge any loopholes in the regulatory framework. 

Global authorities becoming more stringent towards real estate

 

Global regulatory authorities are becoming stringent towards real-estate. This sector is commonly used for money laundering. Canada, Singapore, UK, and Germany are some countries that imposed owner verification regulations on real-estate in the past years. In 2018, (AML) legislation was introduced according to which foreign owners were supposed to identify themselves. The purpose of this bill was to find out who is the owner of a particular real estate property. By 2021, the registry will be made public. 

AMLD 6

 

The AMLD 6 was also proposed in 2019. Sixth Anti-Money Laundering Directive (AMLD6) highlights a stringent framework to combat money laundering and terrorist financing. It extends the scope of criminal liabilities and entities with an updated list of predicate offenses. AMLD6 came up with tougher penalties and widens the criminal liability to legal persons. 

AUSTRAC all set to regulate MSBs

 

AUSTRAC launched a campaign against the unregistered money services businesses (MSBs). It requires the MSBs to register with AUSTRAC and to follow the AML/KYC regulations carved for them. Money transfer businesses that will not register with AUSTRAC will be liable for a fine of $420,000, seven years jail or both. 

These new regulations are implemented to mitigate money laundering and terrorist financing in the financial infrastructure. The MSBs are exploited by financial criminals due to a lack of customer due diligence practices in this sector.

Other than AUSTRAC, FATF and FINTRAC also adopted a risk-based approach towards MSBs. 

The U.S treasury international financial institutions initiative

 

The U.S expanded its counter-terrorism powers and now targets the international financial institutions around the world that aid the terrorist groups working in the U.S. Also it added three Korean groups, namely, Bluenoroff, Lazarus Group, and Andriel into sanctions lists. 

The UK expanding the scope of MLA-2017

 

The UK also amended its KYC and AML regulations and expanded the scope to an international level. The Money laundering Act (MLA-2017) of the UK was amended. The UK-based businesses will practice the MLA rules in their international affiliates operating in non-EEA states. 

To wrap up, 2019 was a phenomenal year for KYC/AML regulations where the authorities not only worked on enhancing the AML regulations but also on improving the compliance habit of liable entities.  

The fraud and planned crime cases in the past few years made the regulatory authorities to draft more focused and detailed KYC/AML regulations to mitigate money laundering, terrorist financing, and crimes related to identity theft. One fake or stolen identity if used wrongfully could initiate a chain of crime that could affect a lot of stakeholders. 

The changes that happened in 2019, made regulatory compliance inevitable for businesses. Many future-oriented businesses are using KYC/AML screening solutions to practice global compliance. Because there are just two ways out of this situation, either it is compliance that leads to fraud-free growth or non-compliance that leads to hefty non-compliance penalties and fraud losses. 

Difference between KYC and AML

Difference between KYC and AML

The growing Fintech industry leads to an increased demand for KYC and AML compliance requirements. Financial institutions face high-risk frauds through the customers and financial transactions. KYC and AML compliance programs build a systematic review of the secure financial system. Customer verification procedures, Know Your Customer and Anti-money Laundering screen customers against possible fraud risks.

The need for KYC and AML compliance has become mandatory to comply with the global and local regulations. The ones who fail to do so, are subjected to harsh regulatory penalties.  To avoid fines, businesses should identify the underlying company standards and the need for KYC and AML compliance in the business framework. Before this, there should be clear understanding of how KYC and AML are different from each other.

Know Your Customer is defined as a process that verifies the identity of customers. Customers are required to provide personal information which includes name, address, contact information, id card, etc. This information is verified before they become part of a  business or company. The term KYC is commonly referred for financial institutions. This is because the finance industry is prone to high-risk frauds that vary from money laundering and terrorist financing to identity theft and data breaches. 

The scope of KYC enlarges and takes in all the Fintech companies that provide financial services to customers. Online businesses that are under threat of a large number of financial frauds also lie into this cluster. KYC compliance has become mandatory whose non-compliance can result in businesses in the hefty monetary and reputational loss.

KYC Incorporates CDD AND EDD

Know Your Customer demonstrates customer verification which ultimately refers to the processes of Customer Due Diligence (CDD). Financial institutions verify the information of clients to make sure that they are building a secure relationship with them. Financial middlemen are supposed to undergo a CDD process to authenticate customer traffic and ensure their incorruptibility. In CDD, ascertain the identity of customers and verify the name and address. After authenticating, identify the risks before making an entity part of the system.

Enhanced Due Diligence (EDD) on the other hand, gathers additional information from customers. EDD came into force with the declaration of the USA Patriot Act. The difference between CDD and EDD should be clear to map the business standards and needs accordingly. Periodic due diligence processes on the customer are highly beneficial to deter the risks that could be generated by an entity later. 

EDD regulations are more efficient because of the extra information and proof it gathers from the customer. Detailed documentation is done for the whole EDD process and regulators are provided with the gathered information. EDD information includes;

  • Geographical factors
  • Property and assets information
  • Transactions types 
  • Occupation information
  • Banking information 

AML procedures detect suspicious transactions happening in the financial system. Entities are investigated and thorough documentation takes place that reveals malevolent entity beforehand. Criminal activity is accelerated when laundered money is used. By breaking that cash flow, a large number of criminal operations can be terminated. For this, a company must first verify the identity but do not stick to it. Continuous transaction monitoring should be done to identify the risky entity before some ruinous situation takes place. 

Global and local regulators are all set up to evaluate the AML standards of businesses. Regulations are declared to which states are supposed to comply strictly. Otherwise, it could lead to heavy regulatory punishments. AML regulations intend to eliminate the incidences of money laundering and terrorist financing. Businesses across the world are evaluated with respect to in-house AML techniques and procedures. This is done to make sure that no individual is facilitated to launder money through some industry or business (knowingly or unknowingly). An overall assessment takes place by global regulators that evaluate the AML norms of countries and present amendments accordingly. 

AML Procedures

The AML framework keeps on updating with the pace of fraudulent activities. Rules and regulations change with time. Following are the steps that help businesses comply with the AML regulations and standards:

Step#1 Stay updated with the changing AML rules and regulations

On a continuous basis, keep on reviewing the company norms and improve them accordingly. 

Step#2 Know Your Customer

KYC is a part of AML compliance. It is necessary to know who you are facilitating with your services and how in return your customer will be. 

Step#3 Identify the external and internal risks

It is necessary for companies to identify the high-risks associated with the business.  Identify the vendors, third parties and customers. 

Elaboration: Difference between KYC and AML

 

Elaboration: Difference between KYC and AML

 

AML procedures contribute to avoiding money laundering and terrorist financing activities. KYC, on the other hand, is the process of gathering customer verification on the basis of gathered information. It is necessary to consider both simultaneously. A business that complies with both KYC and AML regimes is considered well-reputed and trustworthy. The reason is that the chances of fraud are reduced when a company takes in place stringent actions and steps for fraud prevention.