This article is part of Kyckr’s Future of KYC Compliance series, which interviews leading industry professionals and thought leaders to learn more about the trends that will shape the future of KYC compliance.
The following is an interview we recently had with Michael Ronickher, Partner at Constantine Cannon LLP, Washington DC.
What’s the current state of KYC compliance?
KYC compliance has moved more into the spotlight than ever with the passage of the Anti-Money Laundering Act within the recent defense authorisation. The many changes in the AMLA herald a new world for compliance, with increased penalties and greater scrutiny by regulators. Moreover, the addition of the new AML whistleblower program within FinCEN will mean that repeated failures to meet compliance requirements are more likely than ever to make it to regulators.
How has KYC compliance evolved over the past 5 years?
The rise of greater technological solutions for KYC and other BSA compliance measures have provided new ways for regulated entities to meet their obligations. AI-based solutions, for example, can track huge volumes of transactions and look for patterns that might pass a human unnoticed. That said, they cannot replace the tried and true systems; the compliance world still needs smart people of integrity, who form the bulwark against nefarious activities.
How has KYC compliance changed in the midst of COVID?
Like everything, KYC compliance had to adapt in the face of the pandemic. Every step has become harder, but just as necessary—if not more so. Early on, regulators were quick to say that they knew some changes to routine were going to be necessary, but equally quick to make clear that the pandemic was not an excuse for slacking off. On the contrary, FinCEN, FINRA, and the OCC asserted that, while they were willing to accept delays in reporting, financial institutions should be more on guard than ever against those who might be exploiting the confusion of the pandemic.
What are the top trends shaping the future of KYC compliance?
The creation of a more robust whistleblower program for BSA violations will have a critical role in the future of KYC compliance. The whistleblower program will provide a new avenue for those who identify non-compliance and find their alerts to management falling on deaf ears. By incentivising people of integrity to come forward, the program will assist honest compliance professionals in doing the right thing, and it will provide regulators another means of identifying problematic activities. If the program is half as successful as the SEC’s, it will have an enormous impact on compliance.
What’s the future of KYC compliance?
Tighter regulation. Growing international awareness of the US as one of the top remaining secrecy jurisdictions was part of what led to the AMLA and its heightened requirements. Our relatively lax system will continue to be tightened as domestic policies are brought in line with the best international standards. All this will happen as fintech makes for an increasingly difficult job for the compliance professional, who needs to master the ins and outs of new technologies, as well as cryptocurrencies, that make concealing customer identities and transaction sources easier than ever. Regtech can help, but it adds further complexity.