Anti Money Laundering Regulations
Navigating the AML Minefield

By Simon Hill | Uncategorized | 0 Comments

The legal and regulatory landscape for a firm’s compliance with anti-money laundering and counter-terrorist financing can be a little daunting, to say the least. Between the various associations publishing guidelines and recommendations, and the lack of prescriptive requirements in legislation, it is not too difficult to see why this is an area where many firms trip up – and that is without even mentioning the dreaded B-word (Brexit), adding another layer of uncertainty for UK financial services firms.

The advent of FinTech has dragged the financial services sector into the 21 Century, but as financial services solutions grow ever more sophisticated, so too do the measures and methods criminals adopt to take advantage of these innovations. All things considered, preventative measures to mitigate the risk of your firm being used to further financial crime has never been more vital.

Evidently, this has been – and remains – a key focus for the FCA. In the first half of 2020, regulators imposed larger fines for AML failures compared to the whole of 2019! You don’t have to look far to see examples of high-profile cases where even the ‘big boys’ have been getting it wrong.

Standard Chartered Bank were fined £102m in 2019 for breaches of Money Laundering Regulations in relation to their customer due diligence measures and ongoing monitoring. Recently, NatWest have come under scrutiny, with the FCA announcing on 16 March 2021 that it has commenced criminal proceedings against the bank due to failures around (again) risk sensitive due diligence measures.

So, as a start-up or a budding fintech, how can you ensure you do not fall foul of the growing regulatory requirements without inhibiting growth?

As a UK-based fintech, the AML/CTF laws to which you are subject are the Money Laundering Regulations. However, in order to effectively implement systems and controls to satisfy the requirements of these, you need to be able to digest the plethora of guidance made available from various associations.

The Financial Action Task Force sets out its recommendations for countries with a view to providing a comprehensive and consistent framework of measures to be implemented to combat money laundering and terrorist financing, as well as identifying jurisdictions where there are deficiencies in these measures (deeming them high-risk).

Another organisation in this sphere is the JMLSG – The Joint Money Laundering Steering Group – which is made up of the leading UK trade associations and produces guidance which sets out what is expected of a firm with regards to its AML/CTF measures.

The EBA (European Banking Authority) of course has its own guidelines on money laundering and terrorist financing risk factors which were revised in March 2021.

Those responsible for a firm’s compliance with AML/CTF requirements certainly cannot complain about a lack of reading material on this subject. When deliberating over the approach of implementing the numerous measures required, there is clearly a common theme; ‘risk-sensitive’ and ‘risk-based approach’ are clearly the buzzwords of the times.

As Governments and regulators continue to wage war on the ‘tick box’ mentality of firms, it is not unfathomable to see how this can benefit the robustness of a country’s AML/ CTF regime. However, by virtue, this certainly places the onus on firms themselves to better understand their own business (and the risks they are exposed to) in order to implement measures which are proportionate.

Gone are the days where a ‘one-size-fits-all’, ‘off-the-shelf’ AML policy can be adopted. Firm’s must now work in tandem with their compliance teams to ensure the measures they introduce are appropriate, both operationally and strategically.

It is now more important than ever that you have a compliance team that appreciates the need to understand your business and its environment fully, to give you the peace of mind that you are not alone when attempting to navigate the AML minefield.

Simon Hill

ASSOCIATE CONSULTANT

Simon joined Fintech Compliance after several years of service in the catering and hospitality industry. He holds a BA Honours degree in Business and Management from the University of Hull. Since joining FinTech Compliance, Simon has been working in a supporting role with an array of firms to ensure their compliance needs are met to the highest standard, and undergoing full-time training to enhance his knowledge and skills. Simon is now studying towards a CISI diploma in Investment Compliance as he progresses with his burgeoning career in financial services.

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