Not just NatWest: Compliance guru explains why money laundering is rampant in the city


Over the past decades, money laundering has become an increasingly widespread problem. Financial institutions are constantly on the lookout for new ways to combat money launderers, and several anti-money laundering policies have been put in place to help this effort.

However, the recent case against NatWest sent shockwaves throughout the city, with many financial institutions realizing that the financial watchdog, the FCA, has sent a signal to every bank or business in the city: crack down on them. money laundering activities or we’ll come for you.

City AM zoomed in on money laundering in the Square Mile and sat down with Compliance Consultant Mike Hampson, Director of CubeMatch, who has extensive experience in financial institutions, banking, technology and operations.

. “As emerging markets open up their economies and financial sectors, they are becoming increasingly suitable targets for financial crime activity,” said Mike Hampson. City AM today.

Let’s talk about money laundering; the NatWest affair put it firmly back on the Town’s agenda. What anti-money laundering measures can Square Mile businesses take to avoid a public relations debacle NatWest has faced?

We see an endless game of cat and mouse. As financial institutions develop increasingly sensitive tools to detect money laundering, criminals are devising more sophisticated ways to thwart these systems.

Banks are doing what they can to meet the core expectations of a strong AML program: knowing their customers, monitoring their activities, understanding key product and customer risks. Adapt controls appropriately.

But as the complexity, global reach, and opacity of many financial products have grown, the obligations to address these areas have created additional challenges, which must also be supported by law enforcement.

A more sensible approach would be to facilitate collaboration between banks, government agencies and industry infrastructure, led by law enforcement agencies. The goal would be more extensive and faster data sharing in a controlled manner, leading to more and faster prosecutions of real criminals and less of targeting financial institutions fighting a battle without the tools and support to succeed.

Why do anti-money laundering measures need a radical overhaul?

The focus on responding to money laundering and holding financial services companies accountable for shortcomings in their programs has increased around the world. When high-profile scandals reveal a lack of AML controls, a closer look suggests that the global anti-money treatment (AMP) system has serious structural flaws, mainly because some regulators offload their AML policies onto the private sector.

Private sector companies only have a partial view of what’s going on, where what is needed is end-to-end visibility into transactions and money flow.

In turn, many crime law enforcement agencies lack the funds to properly analyze the torrent of suspicious activity reports that banks file when they detect potentially suspicious transactions.

Why is money laundering particularly harmful to the economy?

Money laundering undermines financial sector institutions essential for economic growth, fostering crime and corruption which slows economic growth, reducing efficiency in the real sector of the economy.

Money laundering is a problem in the world’s major financial markets, SEA centers and emerging markets. As emerging markets open up their economies and financial sectors, they are becoming increasingly suitable targets for financial crime activity. Money laundering creates unpredictable changes in the demand for money, as well as large fluctuations in international capital flows and exchange rates.

How widespread is crime and money laundering?

It is estimated that around 50% of global GDP is potentially illicit in one way or another, whether it is a country with a completely corrupt regime or all the flavors of crime and money laundering, the proceeds of crime. Scale needs to be addressed, and this will increasingly affect FinTechs. The major players recognize the importance and take it very, very seriously.

Whenever there is a new provider or a new way to make payments or a new way to transfer money, the criminals immediately try to find a way around it.

Organizations need to collaborate more to share information and data, as you can only report things through regulators or criminal authorities across the country. And you can’t share customer data for good reason or open other relationships with partner banks or across territories. And therefore, everyone performs the same checks on the same people several times.

The industry is starting to move in some geographies towards greater collaboration with regulators, industry, and utilities such as data providers. All of these organizations need to adopt a more collaborative way of tackling AML and KYC. This way, it will be faster to identify a problem and then report it more clearly to the authorities.

What benefits do new technologies, such as artificial intelligence, bring to the KYC and AML process?

KYC and AML are very big hot topics for all banks, and we’ve seen pretty hefty fines over the years when banks fail to meet regulatory requirements.

We will see artificial intelligence play a bigger role in this area in the near future.

So it won’t just be people in the background – much like people using digital banking; for example, you can pretty much go to a line of credit, as long as you can fill in all the correct details. So you can get a relatively quick indication of whether you are likely to get a mortgage of a particular value if you want to. And I think it will continue. And that’s an adaptation of where we are at with the KYC AML process. And it’s only natural that artificial intelligence will play a bigger role in this.

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