Why your AML Software should be as unique as your business

Introduction

Anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) regulations exist to prevent the flow of illicit funds, whether from criminal activities or attempts to obscure the origins of funds. These rules and legislations are intentionally broad, allowing them to be applied across various types of firms and industries. While this universal approach enables their wide application, it also means that they may require significant adaptation in their implementation to effectively manage the day-to-day intricacies of your specific business.

While sector-specific AML guidelines provide a general framework for the prevention of money laundering activities, businesses must develop specific policies and internal procedures if they want to ensure compliance in the long-term. This involves understanding and adapting to the unique circumstances of their industry, their clients, their exposure to different jurisdictions and their own internal structures; thus, implementing measures that go beyond the minimum requirements.

Recently, there have been two major trends in AML that speak to this growing concern. On the one hand, there has been more emphasis on taking a risk-based approach, rather than a prescriptive one-size-fits-all technique. On the other hand, there has been an increase in the use of technology to make AML workflows faster, more reliable and less time consuming.

There is, however, a challenge in bridging the gap between these two trends, as available technology is often not flexible enough to keep up with the demands of an ever-changing landscape.

Limitations of the tick-box approach

Why should you opt for a risk-based approach at all?

There are many shortcomings inherent to a tick-box or checklist approach to AML compliance, from internal strains to customer satisfaction and even regulatory compliance:

False sense of security: If preventing financial crime was as simple as going through a checklist, there wouldn’t have been an estimated $3.1T in illicit funds flowing through the global financial systems in 20231. Ticking boxes and going through the motions is not the same as compliance with regulatory authorities, and it certainly doesn’t mean you are safeguarding your business’s reputation.

Operational burden: Gathering undifferentiated piles of data from each and every one of your clients, individually and through channels like email is not only annoying for clients but also incredibly costly and time consuming. Not to mention, often, unnecessary and unsafe. The key to an effective AML process is to ask your clients the right questions and, importantly, to keep the information up to date in a way that is quick and easy for everyone.

Erosion of compliance culture: when you work with a team of experts you expect them to use their critical thinking skills to detect any threats or inconsistencies. However, when your business is bogged down by manual processes, checklists, and other time-wasters, that leaves little time for your team to actually consider what they’re doing and whether there are any red flags.

Additionally, regulators and supervisors themselves see the issues of using a cookie-cutter approach, and recommend opting for personalised systems, so doing so can help you maintain compliance going forward.

What to adapt and why?

When we talk about adaptability it’s important to be clear on what we mean. Flexibility and adaptability are more than buzzwords, and can have a real impact on both your business and your customer.

Firstly, your systems need to be adapted to your sector. A bank and a small accountancy firm for example will have widely different needs and approaches to client management, and yet they both must abide by the same AML regulations.

Your location is also key in determining the right processes for you. UK-specific directives should be considered when operating on national territory, but if your do any business overseas you may also need to consider other jurisdictions and local regulations.

Lastly, even if you use the exact same systems as a direct competitor of the same size, country of operation and specificities, you may still require a completely different set of processes and policies purely due to your own internal structure. Always make sure to examine your own firm-wide risk assessment, taking into consideration your client profiles, the services you offer, jurisdictional risk exposure and delivery channels.

This means that elements such as your customer risk assessment, onboarding questionnaire, document requirements, screening policies, EDD rules and client acceptance policies need to adapt to each specific business and situation.

How technology can help

Technology is already widely used in AML/CFT efforts, as increasingly sophisticated methods for fraudulent or criminal activity require faster and more efficient responses. However, these technologies often focus on broad best practices and guidelines, which means they often don’t match with your internal policies and procedures.

A system that doesn’t match your business is inefficient at best, and harmful at worst.

If your business is fast growing, constantly changing or if the regulatory environment is difficult to keep up with, it is especially important that your software system has the flexibility to adapt with you. Additionally, if you choose a software that your teams find difficult to use, you may as well be using manual processes.

It is important to make sure the technology you choose is an actual benefit to your internal practices, and seamlessly wraps around your workflows and teams. This way you can ensure that the technology you implement is working to make your business and clients safer every step of the way.

A good software solution is one that will wrap around your business in such a way that it becomes an extension of it. It should be simple enough to use that it saves your teams’ time, and sophisticated enough to be able to handle large amounts of data. It should be constantly changing and updating as the regulatory landscape itself changes and updates, and it should automatically flag any inconsistencies and changes in regulation.

A Better Way

These issues are why we developed InScope-AML. We wanted to leverage technology that embraces a risk-based approach in a way that is easy to use, in order to make your business run more efficiently and in such a way that complies with current regulations and guidelines. Rather than being a software that you purchase and then must use on your own, InScope-AML takes an adaptable, more collaborative approach, where we provide you access to ongoing support for your onboarding and customisation needs.

Why your AML Software should be as unique as your business