Why is it so difficult to implement adequate AML procedures?

25th October 2018 3076 - Blog Posts

Anti-money laundering compliance is more important than ever, as cases of money laundering and financial crime continue to rise – in fact it was reported that investigations into money laundering leapt 12% last year*. Implementing adequate AML procedures can be an onerous task though, especially as regulations constantly evolve and become more stringent. In this blog article, we examine some of the barriers that firms face when implementing adequate AML procedures.

Volume and reliance on manual processes

As AML requirements get stricter, many firms are constrained by the sheer volume of tasks. This is often exemplified by an over-reliance on manual processes instead of the use of AML software. For example, many firms still rely on email for important document requests which creates longer processing times, increases the risk of identity fraud and doesn’t leave a clear structured audit trail. It can become particularly problematic if members of staff leave the company, and crucial documentation is stored on inactive email accounts. Using specialist AML compliance software, such as MaxComply, can aleviate many of these problems, providing a clear audit trail and cutting processing time sometimes by as much as 50-70%.

Lack of clearly defined functions and designated responsibilities

Another barrier to implementing adequate AML procedures is a lack of suitably defined and documented processes. Firms should have a robust framework that is clearly outlined to support AML implementation. Setting up defined procedures, including risk assessment and case management tools which are standardised across regions and departments is crucial to ensure AML compliance. Many firms also hit a stumbling block because there is a lack of clarity in responsibilities in certain defined roles, such as onboarding. To ensure AML compliance runs smoothly, roles need to be designated to suitably qualified persons within the business. Alternatively, outsourcing AML compliance or the MLRO function to a firm like Lawson Conner can slash the regulatory burden and cut costs in the long run. Focusing on your daily business tasks can then be your priority.

Lack of compliance talent

There is a lack of compliance talent within the financial industry – in fact a recent survey of chief executives found that 69% are concerned about the compliance skills shortage. The rapid influx of regulatory change has contributed to the crisis and can be a real barrier to maintaining adequate AML procedures.  This can be partly negated by harnessing technology to automate routine tasks and leveraging compliance software to make AML procedures more efficient. Alternatively outsourcing all, or some, of the compliance function provides an opportunity to scale up when necessary – if demands suddenly grow, a compliance partner can provide an additional level of support without the need to laboriously hunt for extra staff to bolster an in-house function.

The increasing complexity of AML regulation

AML procedures are becoming increasingly complex and financial services firms need a robust infrastructure of cross-channel detection, and excellent data quality, especially since the advent of GDPR. The risk levels for each customer are also variable according to transaction type, which means AML procedures need continuous monitoring, which often poses as another barrier to adequate implementation.

At Lawson Conner, we provide leading compliance support, and specialise on reducing risk for our clients, leaving them free to focus on their core business activities. AML can be a time-consuming and costly process, but it is critical that it is conducted correctly.

* “Foreign Money Laundering inquiries to UK leap 12%” – The number of mutual legal assistance requests from overseas into the UK rose 12%, according to a report in the Financial Times 11.06.2017.