“We’re not a financial institution.”
“Our sponsor bank takes care of that.”
“We’re fine using spreadsheets for now.”
“Isn’t AML just for banks?”
These are common lines of reasoning people have for scrolling past the anti-money laundering articles. But AML regulations are becoming broader in terms of markets covered and stricter in obligations all the time. The key message is that if you aren’t already looking at an AML program beyond just PEPs and sanctions screening, your carefree days are numbered.
Take the recent AML 2020 Act for example. This is the most extensive reform to the U.S. AML regulations since the Patriot Act almost two decades ago. Among other changes, it includes language designed to:
- Eliminate anonymous holding companies
- Expand its definitions to include antiquities traders and virtual currencies
Singapore also just offered new guidance on AML that takes aim at digital currency businesses and other virtual asset service providers (VASPs). South Korea just passed new AML rules for the same purpose. And the European Union’s Sixth Anti-Money Laundering Directive (6AMLD) needs to be implemented by financial institutions by June 3, 2021. As money launderers move beyond banks into new vectors including real estate, apartment/home sharing services, crypto, non-fungible tokens (NFTs) and other non-traditional transactions, it’s more important than ever for businesses to do their part to help prevent human trafficking, terrorism and other criminal activity by keeping dirty money out of circulation.
So even if you aren’t legally responsible for complying with AML laws today, chances are very good that you soon will be. And studies show that a fine by a regulator, and the publicity associated with it, lowers the enterprise value of the organization by 5.5% — not even taking into account all the additional costs that will be leveled to meet the deficiencies. That will lead to some very unhappy investors and shareholders.
It’s never too early to start developing a strategy to protect your business and its reputation. A homegrown solution cobbled together from spreadsheets and your CRM isn’t scalable and won’t stand up to an audit, and building a proper solution from scratch is far too time-consuming and expensive to create in-house. There are some key elements your AML compliance program should have, including:
- Watchlist screening (PEPs, sanctions, adverse media, etc.)
- Transaction monitoring that uses machine learning to reduce false positives
- Case management and investigation tools
- Streamlined regulatory reporting, such as a narrative builder that shortens the time it takes to prepare a suspicious activity report
To learn more about building an AML compliance program, check out this webinar. It will walk you through the best practices you need to help keep bad actors (and bad headlines) away from your business. To learn more about Jumio’s AML solutions, check out this page.