Fintech, foreigners, MSBs vulnerable to AML de-risking
Weary of the costs and risk of AML Compliance, some banks in the United Kingdom are choosing to de-risk by closing certain types of accounts and refusing new accounts to certain customer types. But Britain’s Financial Conduct Authority (FCA) is warning banks to pay attention to laws concerning fair play by financial institutions and the impact of de-risking on the British economy.
The Reuters report from last week singled out “financial technology firms and foreign nationals” as being at the top of the list of de-risking targets. The report noted that other unappealing business types relative to risk include money-transmission businesses, pawnbrokers, and NGOs conducting work in geographic areas known to be rife with money laundering or terror activities.
Some trade-finance and defense-industry companies, especially small ones, are also moving into the de-risking crosshairs, according to the FCA.
Risk-based approach & AML software innovations
Financial-industry and economic authorities in Britain are warning against the practice, both in terms of fair play and also in terms of hindering economic growth and competiveness with other nations. According to Reuters, the FCA has asserted that it will work with financial institutions to better identify actual risk and to identify and embrace innovation that helps financial institutions achieve risk-based compliance at a reasonable cost.
AML Partners CEO Frank Cummings is a longtime supporter of that approach—using a true risk-based approach to identify and mitigate true risk and using the best AML software solutions to work both efficiently and effectively.
“The pressure on banks is intense now in terms of AML/CFT Compliance, but de-risking is not the answer. It’s a shortcut that hurts real people who operate entirely within the law,” Cummings said. “Instead of de-risking, financial institutions need to create a risk-based approach—and implement it with excellent AML software solutions and competent professionals within an organization that cares about Compliance. This approach delivers excellent Compliance results—at a reasonable cost in both time and money.”
“Truly, good Compliance is not some giant money-sucking mystery; it’s really about good management and smart implementation,” Cummings concluded.
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