AML Summit shares global best practices on improving AML standards in the country

By Shannon Jayawardena

The AML Summit organised by Fintelekt Advisory Services shared the global best practices on improving Anti-Money Laundering (AML) standards in the country while deliberating on the corrective measures required yesterday.

The event invited various regulators, practitioners, consultants and technology providers to share their insights on fighting against money laundering, financial crime and trade-based money laundering (TBML).

Fintelekt Advisory Services Managing Director Shirish Pathak said: “It’s important for finance companies to have a compliance association. Also, there’s no point in each of you putting great systems in place, technology in place, processors in place and filing it to the Financial Intelligence Unit (FIU), if they cannot handle it properly or if they don’t know what to do with it.”

He stressed on the fact that FIU agility is something that has been lacking for the last couple of years and needs some improvement in going forward. Finance companies need to take these really seriously and must focus on knowing their businesses and customers, invest in the right tools and technologies, build a culture of compliance in the organisation and enhance co-operation within the eco-system. 

Pathak also added that, though anti-money-laundering laws cover a relatively limited number of transactions and criminal behaviours, their implications are far-reaching. AML regulations require institutions issuing credit or allowing customers to open accounts to complete due diligence procedures to ensure they are not aiding in money-laundering activities. 

HDFC Bank India Principal Officer and Head AML Ravi Lahoti speaking on red flag indicators that play a key role in AML noted that a red flag is an indicator of potential problems, adding that a very important part is prevention, saying that prevention is better than detection. He mentioned that knowledge of emerging trends is essential for better implementation of red flags.

He went on to state that the movement of money has now become so fast that you cannot even track it at times. Hence there are many challenges such as identical and high number of transactions, complex transaction networks, a high number of false positive alerts, alert analysis failures, missing real alerts, operational overheads and non-availability of trained resources. 

“Additional variables, review of past false positives, whitelisting and suppression are important factors when it comes to reducing false positives. Bankers also have to make an assessment about their customers, which is crucial” Lahoti added. 

Acuity South Asia Country Manager Sambit Mohanty noted: “Global financial institutions are increasing terminating or restricting business relationships with remittance. The number of correspondent relations between banks has hence gone down as a result of de-risking.”

De-risking may threaten progress that has been achieved on financial inclusion. It also has the potential to reverse some of the progress made in reducing remittance prices and fees, if banks close or restrict access for money transfer operators.

He noted that over the past several decades, money laundering has become an increasingly prevalent issue. Both financial institutions and governments are constantly looking for new ways to fight money launderers, and several anti-money laundering policies have been put in place to help this effort.

Thomson Reuters South East Asia Risk Intelligence Solutions Specialist Anuja Mavdikar said: “We are seeing that there is intensive supervision that is coming from various enforcement agencies. We are also seeing a challenge in balancing compliance and commercial demands as well. These are the challenges that the regulatory challenges that the boards have been facing.”

She noted that in 2008, there were around 8700 regulations and in 2017, the numbers rose to nearly 56321 regulations, which makes the job of a compliance officer very difficult. AML threats account to $800 billion - $2 trillion per year, which is equivalent to 2-5% of the global GDP. 

The event highlighted the fact that, in order to protect businesses from AML and mitigate the issues, you must educate your employees, improve your due diligence, introduce internal controls and handle transactions with high-risk countries with care. 

Pix by Ruwan Walpola