If you think anti-money laundering (AML) compliance only affects banks: think again.
Jumio
AML regulations have been changing rapidly in recent years, both in depth and breadth. The AML 2020 Act, for example, includes the most sweeping changes in AML laws since The Patriot Act was passed in the wake of 9/11 in 2001. Among other changes, the new act focuses on:
- Eliminating anonymous holding companies
- Expanding its definitions to include antiquities traders and virtual currencies
This means companies are required to know exactly who their customers are, and businesses who facilitate the transfer of virtual currencies are under greater scrutiny.
A Global Movement
This expansion of AML regulations is happening around the globe. The Monetary Authority of Singapore (MAS) introduced the Payment Services Act in January 2020 to cover digital currency businesses and other virtual asset service providers (VASPs). And within a year, they passed amendments to include businesses who facilitate Digital Payment Token (DPT) activity. South Korea passed new AML rules for the same reason.
The Dangers of Non-Compliance
As money launderers move beyond banks into new vectors including real estate, apartment/home sharing services, crypto, non-fungible tokens (NFTs) and other non-traditional transactions, it’s more important than ever for businesses to do their part to help prevent human trafficking, terrorism and other criminal activity by keeping dirty money out of circulation.
Yet it’s common to hear fintechs say they’re satisfied with taking a rudimentary approach to AML compliance. Too often you’ll find a single, overworked compliance analyst using spreadsheets and SQL queries to try to find suspicious activity. Minimizing spend on compliance might make board members happy in the short term, but studies show that a fine by a regulator, and the publicity associated with it, lowers the enterprise value of the organization by 5.5% — not even taking into account all the additional costs to meet the deficiencies. That will lead to some very unhappy investors and shareholders.
Finding the Right Solution, Right Now
Even if you aren’t legally responsible for complying with AML laws today, chances are very good that you soon will be. To protect your business, you need to put in place a solid AML compliance program right from the start. A homegrown solution cobbled together from spreadsheets and your CRM isn’t scalable and won’t stand up to an audit, and building a proper solution from scratch is far too time-consuming and expensive to create in-house. Instead, find a purpose-built AML solution with the following key elements:
- Watchlist screening (PEPs, sanctions, adverse media, etc.)
- Transaction monitoring that uses machine learning to reduce false positives
- Case management and investigation tools
- Streamlined regulatory reporting, such as a narrative builder that shortens the time it takes to prepare a suspicious activity report
To learn more about AML compliance, check out this webinar. It will walk you through the best practices you need to help keep bad actors (and bad headlines) away from your business.
