5 ways to enhance AML compliance
14 Apr 2020 10:07 am by Mark Dunn
The UK is bringing forward a new tax for financial services companies to pay towards the government’s anti-money laundering (AML) efforts, and it is committing millions of pounds to tackle financial crime. This fits a global trend of tougher AML legislation and enforcement . We look at these developments and identify five steps companies can take to enhance AML compliance .
The UK’s new Chancellor of the Exchequer, Rishi Sunak, announced his first budget earlier this month. Unsurprisingly, its main focus was on tackling the impact of the Coronavirus. But buried in his announcement was clear evidence of the UK’s anti-money laundering regime (AML) becoming tougher. The proposed measures included:
- A tax on financial services firms to help pay for anti-money laundering efforts. The proposed levy would apply to “firms subject to the money laundering regulations”. This is a long list of firms, including financial services institutions, accountants, credit institutions, independent legal professionals and estate agents.
- The government will give an extra £14 million to Companies House (the UK’s registry of companies) to support its work in “tackling economic crime and anti-money laundering”.
- £10 million will be provided to the UK’s regulators “to unlock the potential of emerging technologies”.
- A Digital Identity Unit will work on ways to help people to prove they are who they say they are without showing paper documents.
Some companies oppose the new tax. The chair of the City of London Law Society called the levy “unhelpful” and some firms will be concerned about spending more money on AML efforts. If firms take the money to pay the levy out of their existing compliance budget, however, they risk facing a much more significant fine and reputational damage if money laundering goes undetected.
Global trend of AML legislation requires due diligence
The UK is stepping up its approach to anti-money laundering regulation and enforcement. The European Union is doing the same - the Fifth Anti-Money Laundering Directive came into force in January and the Sixth Directive follows suit in December. Companies face growing regulatory, financial, reputational and strategic risks of being caught up in money laundering scandals. So, it has never been more important to follow best practice in tackling money laundering. Here are our top tips:
- Know who you are doing business with. Nexis Diligence helps to identify potential red flags that require deeper investigation, such as appearance on a PEPs list
- Ensure you carry out enhanced due diligence on all Politically Exposed Persons (PEPs) with whom you do business, since they often carry a higher risk of money laundering. Nexis® Solutions has a variety of tools to help you to manage large volumes of risk checks against global lists of PEPs.
- Use technology to support AML compliance. Growing numbers of financial services companies are using Robotic Process Automation (RPA) to make the Know-Your-Customer (KYC) verification process more efficient and to carry out enhanced due diligence on entities. Automating this process drives greater cost savings through innovative process efficiencies.
- Seek information on the beneficial ownership of third parties. Our tools help to uncover beneficial ownership by companies by providing access to critical financial information, corporate hierarchies, executive/director relationships on public and private organisations around the globe.
- Understand the differing AML regulations in different jurisdictions. In addition to connecting you to regulatory data, Nexis Diligence helps you maintain an audit trail of due diligence investigations to demonstrate adherence to best practice recommendations of regulators around the world.