Are your transaction monitoring and sanction screening processes meeting ever-tightening regulatory requirements? While keeping up with the changing regulatory environment can be challenging, the penalties for non-compliance are worse.
Firms have struggled to keep up. A recent case saw one major European bank fined €360 Million for serious deficiencies in its anti-money laundering (AML) approach and implementation, having withheld critical information from authorities.
The firm also lacked the required customer identification program — thereby failing to perform adequate due diligence on customers and business partners — and did not perform periodic risk reviews of foreign financial institutions.
As business picked up, these shortcomings were exacerbated by an increase in new business. This was due to a higher inflow of customers that could not be managed through historical processes.
However, it is not only the company that gets fined and censured. In another case, the former chief operational risk officer in one of the major U.S. banks agreed to pay a substantial penalty for his failure to implement and maintain an effective AML compliance program to protect the bank.
According to the LexisNexis Risk Solutions’ latest True Cost of AML Compliance Survey, the average annual cost of AML compliance for mid/large asset-sized financial institutions in the studied countries has risen by 9-10% during the past two years. This growth is expected to continue at a similar rate during the next year.
For virtual banks, the challenges of AML compliance are further complicated by the sheer volume of transactions, internet anonymity and the demand by customers for a frictionless banking experience. Balancing these with rising regulatory scrutiny can be difficult for any bank, let alone virtual ones.
Instead of taking a piecemeal approach to implementing these technologies, virtual banks should look into developing a fully integrated compliance platform that consolidates compliance processes, standardizes controls and brings enterprise wide operational consistency. Deploying such a platform can simplify complexity and boost the efficiency of their KYC processes by accessing identity verification, screening, due diligence and fraud prevention services through a single point of entry.
More importantly, it can help virtual banks to stay a step ahead in a constantly evolving regulatory environment.
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