LAS VEGAS — Wondering what your colleagues in the financial sector are doing to battle financial crimes? Are they using artificial intelligence to spot bad actors? Does regulatory compliance keep them up at night, staring at the ceiling? And what about that Customer Due Diligence (CDD) Rule that went into effect more than two years ago?
I unveiled the results of the 2019 Thomson Reuters Anti-Money Laundering Insights Report, done in partnership with the Association of Certified Anti-Money Laundering Specialists (ACAMS) at its 18th Annual AML and Financial Crime Conference late last month.
We have done this report three years in a row, which means now we have more data to work with. Did things change all that much? In some respects, they did, especially as it relates to anti-money laundering (AML) and CDD processes, data solutions, and decision-making. But what didn’t change? The CDD Rule, for example, while now more familiar to financial institutions after its implementation two years ago, still remains a top challenge.
The questions in the survey measure compliance processes and activities used by companies in the financial sector in response to AML regulations, associated CDD, and Know Your Customer (KYC) requirements. Respondents were considered “decision makers” in their organizations and came from all across the financial spectrum — from commercial banking and the insurance sector to even casinos and the gaming industry, which was new for 2019.
Click here to download your copy of the 2019 Thomson Reuters Anti-Money Laundering Insights Report.
Like the previous two years, respondents answered questions related to a broad range of measures to track trends among companies in the financial sector, including:
- CDD and AML processes;
- Beneficial Ownership;
- Enhanced Due Diligence (EDD);
- Data solutions and decisions; and
- Challenges and trends.
Many of the AML and CDD findings were analogous to previous years, although there were some differences. Notably, two-thirds of respondents reported having standardized their company’s onboarding processes across business units to reduce AML risk, a significant increase from 2018.
Another new processes appeared to be that more institutions are considering third-party screening enhancements. Moreover, nearly half of all organizations are incorporating document scanning into their digital identity verification at account opening, and 23% were using mobile phone authentication.
As we know, EDD monitoring is triggered by a high-risk client, product or geography. Sometimes this requires a better understanding of a customer’s source of wealth or needs continuous transaction monitoring. This means that the financial institution must take a deeper dive into the client or account to ensure criminal activity isn’t afoot. The survey showed that the most common trigger of these enhanced procedures were foreign wire transfers to high-risk jurisdictions, such as places with limited tax transparency or those subject to the Office of Foreign Assets Control (OFAC) sanctions list.
Institutions reported that the most important information when conducting EDD remains the client’s criminal history, geographic information, and adverse media. Again, not surprising.
One EDD trend was particularly notable, however. And it may be because this question was new to this year’s survey. Respondents reported that their institutions are also looking at lawsuits (54%), civil judgments (54%), financial information (52%), and liens (34%) when evaluating clients’ standing. All of this helps AML professionals get a clearer picture of the client and their activities.
Another highlight which also wasn’t surprising for the AML/ACAMS crowd: false positives. These are the alerts which come up when a customer conducts a suspicious or series of suspicious activities in a pattern indicative of a financial crime, but which upon investigation turn out to be legitimate. These false positives continue to plague financial institutions and were identified as a top AML and CDD concern, according to the survey.
Want to take a deeper dive into these findings? Join us for our upcoming webinar, 2019 Thomson Reuters Anti-Money Laundering Insights Report Decoded, with Dennis Lormel, former chief of the FBI Financial Crimes Program, and Gina Jurva, Attorney & Manager of Enterprise Content at Thomson Reuters, at 1 pm, EST, on October 29.