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How Compliance Professionals Can Combat Rising Financial Crime

Financial Crime
February 16, 2021

Compliance has never been the most alluring function within regulated organisations. Many professionals who do not regularly deal with compliance are satisfied with the compliance team’s contribution to avoiding fines and penalties.

However, when things go wrong, all eyes immediately turn toward compliance and the people responsible for maintaining it.

Avoiding sanctions is one goal of compliance, but compliance covers far more than checkboxes on regulators' lists. Laws regarding financial crime compliance change constantly, and while banks and other financial institutions should comply with regulations, they should also follow the spirit of the law to stop financial criminals before the damage becomes severe.

Keeping Pace With Constant Compliance Evolution

Perhaps if regulators could regulate necessary best practises as quickly as criminals found new ways to break the rules, compliance and anti-money laundering (AML) professionals could limit their visions to meeting the criteria set for them by others. Unfortunately, regulators rarely meet that high standard.

While the EU has committed to push harder for regulated firms to comply with the 4th and 5th Anti-Money Laundering Directives, the professionals who implement the safeguards cannot sit idly by. These rules (and the secondary rules for following them) continue to evolve. Right now, the EU is working to standardise compliance regulations to make it easier for organisations to follow the law. As compliance becomes more straightforward, however, the standards and controls will become more rigorous.

Savvy criminals are eager to mislead financial institutions (and their customers) to steal data and money, and they will happily use the latest tools and tricks to get their way. In the face of such dangers, compliance professionals need the best tools on their side. Primary source intelligence gathered in real time, for example, is quickly becoming an absolute essential. Artificial intelligence and machine learning, once luxuries, could soon become the table stakes for businesses to comply with evolving regulations.

Perhaps things would have looked different this year if it were not for the COVID-19 pandemic, but regulators are not eager to allow KYC and AML compliance to lag. On the contrary, with more pressure being put on financial systems in a more distributed global financial ecosystem, regulations are growing tighter, not looser. New technologies, stimulus packages, loans, grants, and uncertain futures for partner vendors present significant challenges, but naturally people need access to financial services while regulators make their demands. The compliance professionals, meanwhile, remain stuck in the middle.

Combating Compliance Risk With Smarter Action

Just because compliance professionals are stuck in the middle, it does not make them powerless. On the contrary, these are people on the front lines of a new war against cyber and financial crime. With the right tools and processes, AML and compliance professionals can make significant progress in their fight while complying with evolving regulations the whole way.

Any compliance overhaul begins with risk ratings, the standards by which regulators determine the safety and viability of financial processes. The turmoil of the last year could lead to challenges as the need to regain access to financial systems clashes with the evaluated risk of opening that access. Within this influx of genuine interest will, of course, be an influx of criminals. In the face of these challenges, primary source data gathered in real time will be enormously beneficial.

In addition to reviewing risk ratings, regulators also enforce requirements of compliance. Customer records, for example, must be maintained and updated without breaking safety standards, and these record keeping requirements continue to evolve. After the risk ratings come the ongoing monitoring. Real-time change alerts obviously help here as well, but as time goes on, tools like AI and machine learning will help organisations identify patterns in transactions that correlate with criminal behaviours. Increased digital transformation will empower compliance professionals to monitor and act upon compliance risks before the risks materialise into losses, reputational damage, and further harm.

By reaching this goal, compliance professionals can transform their role from an administrative cost to a function that drives value by protecting against damages and bolstering confidence in their organisations. They can even go one step further to evolve from a group that meets regulators' demands to a group actively protecting the public and the financial industry from bad actors. As 2021 begins, it may just turn out to be the year of the compliance professional.

Financial Crime
February 16, 2021

Compliance has never been the most alluring function within regulated organisations. Many professionals who do not regularly deal with compliance are satisfied with the compliance team’s contribution to avoiding fines and penalties.

However, when things go wrong, all eyes immediately turn toward compliance and the people responsible for maintaining it.

Avoiding sanctions is one goal of compliance, but compliance covers far more than checkboxes on regulators' lists. Laws regarding financial crime compliance change constantly, and while banks and other financial institutions should comply with regulations, they should also follow the spirit of the law to stop financial criminals before the damage becomes severe.

Keeping Pace With Constant Compliance Evolution

Perhaps if regulators could regulate necessary best practises as quickly as criminals found new ways to break the rules, compliance and anti-money laundering (AML) professionals could limit their visions to meeting the criteria set for them by others. Unfortunately, regulators rarely meet that high standard.

While the EU has committed to push harder for regulated firms to comply with the 4th and 5th Anti-Money Laundering Directives, the professionals who implement the safeguards cannot sit idly by. These rules (and the secondary rules for following them) continue to evolve. Right now, the EU is working to standardise compliance regulations to make it easier for organisations to follow the law. As compliance becomes more straightforward, however, the standards and controls will become more rigorous.

Savvy criminals are eager to mislead financial institutions (and their customers) to steal data and money, and they will happily use the latest tools and tricks to get their way. In the face of such dangers, compliance professionals need the best tools on their side. Primary source intelligence gathered in real time, for example, is quickly becoming an absolute essential. Artificial intelligence and machine learning, once luxuries, could soon become the table stakes for businesses to comply with evolving regulations.

Perhaps things would have looked different this year if it were not for the COVID-19 pandemic, but regulators are not eager to allow KYC and AML compliance to lag. On the contrary, with more pressure being put on financial systems in a more distributed global financial ecosystem, regulations are growing tighter, not looser. New technologies, stimulus packages, loans, grants, and uncertain futures for partner vendors present significant challenges, but naturally people need access to financial services while regulators make their demands. The compliance professionals, meanwhile, remain stuck in the middle.

Combating Compliance Risk With Smarter Action

Just because compliance professionals are stuck in the middle, it does not make them powerless. On the contrary, these are people on the front lines of a new war against cyber and financial crime. With the right tools and processes, AML and compliance professionals can make significant progress in their fight while complying with evolving regulations the whole way.

Any compliance overhaul begins with risk ratings, the standards by which regulators determine the safety and viability of financial processes. The turmoil of the last year could lead to challenges as the need to regain access to financial systems clashes with the evaluated risk of opening that access. Within this influx of genuine interest will, of course, be an influx of criminals. In the face of these challenges, primary source data gathered in real time will be enormously beneficial.

In addition to reviewing risk ratings, regulators also enforce requirements of compliance. Customer records, for example, must be maintained and updated without breaking safety standards, and these record keeping requirements continue to evolve. After the risk ratings come the ongoing monitoring. Real-time change alerts obviously help here as well, but as time goes on, tools like AI and machine learning will help organisations identify patterns in transactions that correlate with criminal behaviours. Increased digital transformation will empower compliance professionals to monitor and act upon compliance risks before the risks materialise into losses, reputational damage, and further harm.

By reaching this goal, compliance professionals can transform their role from an administrative cost to a function that drives value by protecting against damages and bolstering confidence in their organisations. They can even go one step further to evolve from a group that meets regulators' demands to a group actively protecting the public and the financial industry from bad actors. As 2021 begins, it may just turn out to be the year of the compliance professional.

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