AML Compliance Program: More than a Box Ticking Exercise

According to Lexis Nexis Global True Cost of Compliance 2020 report, the projected total cost of financial crime compliance across financial institutions worldwide is $213.9 billion, up from $180.9bn dollars the previous year.


The results come from a comprehensive survey of 1,015 financial crime compliance decision makers at financial institutions, including banks, investment firms, asset management firms and insurance firms around the world.

Having worked within the UK financial services industry for close to a decade. I know the importance of having a robust compliance program fit for purpose. The goal is not to sound like a talking drum by reinforcing how important the risk-based approach should be a focal point for the industry as a whole. These questions are fundamental to the role of risks in our client relationships. Have we assessed the risk of our client relationships? What is our risk appetite? Would this client relationship pose any risk to our financial institution?

In recent reports, according to the FCA, “NatWest accepts that it failed to comply with regulation 8(1) between 7 November 2013 until 23 June 2016; and regulations 8(3) and 14(1) between 8 November 2012 until 23 June 2016 under MLR 2007 in relation to the accounts of a UK incorporated customer. These regulations require certain firms, including those regulated by the FCA, to ensure they have adequate anti-money laundering systems and controls to prevent money laundering.

The case has now been referred to the Southwark Crown Court for sentencing.

This is the first criminal prosecution under the MLR 2007 by the FCA. 

No individuals are being charged as part of these proceedings.” This is a first (under the MLR 2007) and also a wake-up call to those who are comfortable looking the other way rather than take personal responsibility and ownership when the financial system is being used to launder proceeds of financial crime. For some relationship managers, offboarding a client always seems to be a tough call. There is always a rationale to maintain the client relationship, irrespective of the risks identified in the course of due diligence. A paradox of sorts!

After all, it could be all about closing a deal for some and making money from proceeds of crime, rather than ensuring we have a safer financial system that is not used to launder illicit funds.

Also, rather than wasting funds on ceaseless remediation programs, having a compliance program with the right KYC processes and policies in place could be a right step in fighting financial crime headlong rather than allowing the institution be used to launder illicit funds and remediating afterwards.

When setting up compliance and remediation programs becomes an avenue to avoid regulatory scrutiny without ensuring that the relevant stakeholders know the implication of doing the right things. Then it becomes a problematic scenario. Assessing the risks in our existing client relationships and new to bank customers would ensure that our FIs are not used as a conduit to launder proceeds of crime. The question to ask is, are the correct processes and policies in place to ensure that the compliance program runs without hitches.

Also, the question that should be paramount to all stakeholders is, what is the worth of our reputation in the marketplace? A hundred of millions of dollars or pounds in extra profits from washed money? Does this compare to the reputational damage, regulatory fines, loss of investor confidence and business loss that could result from not committing to doing the right thing. Having a compliance program in place is definitely the way to go, however stakeholders must ensure that this is not just another box ticking exercise to bypass regulatory scrutiny or bolster public perception.

Many of the regulatory fines and reports on illicit funds passing through the financial system could be a thing of the past if individuals at all levels commit to do the right thing. The fundamentals of Know Your Customer and conducting due diligence should be embedded in financial institutions’ overall vision. The right investment should also be made into the technology infrastructure and people that will aid record keeping and ensuring compliant processes are adhered to.

In conclusion, getting our compliance programs to a utopia where it is more than a box ticking exercise would involve the collective effort of all stakeholders.

Photo by Kentaro Toma on Unsplash

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