U.K. seeks better balance in AML regs


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Preventing money laundering without burying banks and legitimate businesses in red tape is proving difficult. Just ask the United Kingdom.

Just last month, Prime Minister David Cameron railed against money laundering and against the flood of illicit cash that flows into the British real-estate market from shadowy shell companies. But those AML pressures can bury banks and legitimate businesses. With that in mind, U.K. Business Secretary Sajid Javid announced last week that his nation would undertake review and streamlining of existing compliance regulations in order to deter laundering without unduly burdening legitimate business relationships.

According to a story in the Financial Times, Javid said the review would focus on how existing laws are implemented by regulators of Britain’s financial services and related industries. Of particular concern is “the complexity of the system and the differing interpretations among regulators,” according to FT political editor George Parker.

AML Partners CEO Frank Cummings agreed, and he said that this a constant in his firm’s compliance work with financial institutions in the U.S. and abroad.

“There’s law, there’s rule, and there’s expectation. And it’s usually the expectation that gets you,” Cummings said. “Banks don’t just have to do KYC. They also need to do KYE—Know Your Examiner. Remember, it’s the examiner’s expectation that counts in the current system—not your own interpretation.”

Javid’s announcement in the U.K. was met with interest by trade organizations for financial institutions and foreign-trade interests. And it was met with wary hopefulness by industry watchdogs who abhor the criminal element of money laundering but worry about the impact of AML regs on legitimate NGOs and small businesses.

Cummings said meaningful streamlining makes sense, but he believes a larger cultural shift is needed in the foundational approach to legislating and regulating against money laundering and terror financing.

“The adversarial approach right now is a huge hindrance. We need to stop wasting tens of millions of dollars—and yet getting nothing done,” Cummings said. “We at AML Partners advocate a Compliance environment in which regulators and financial institutions work together to achieve meaningful AML/CTF compliance. And if after working together on reviewing and remediating compliance issues, an institution willfully avoids compliance, then tougher measures are necessary. Unfortunately, in the current model, the adversarial relationship governs nearly all interactions directed at financial institutions.”

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