Strengthening AML defences: Responding to converging global threats

In the complex realm of AML compliance, MLROs / AMLCOs occupy a critical position. They’re tasked with safeguarding companies and the economy at large against illicit financial activities. But it’s an uneven fight.

With every new technology, financial vehicle, corporate structure, legislative loophole, conflict or disaster, criminals are there, ready to exploit and hide their illicit funds. For MLROs, often under-resourced and over-worked, it’s like bringing a sword to a gunfight.

Reliance on threshold-based monitoring rules, a multitude of disjointed technologies or sporadic customer due diligence reviews is inadequate. The scale of turbulence we now face demands adaptive and collaborative defences that allow us to stay at least one step ahead of criminals.

Sharpening our risk lens.

It goes without saying that faced with this fast changing world, AML policies and procedures need continuous review and refinement in order to spot creative laundering methods.

In this new world, AML risk approaches now need to blend historical red flags such as individual nationality or entity incorporation location, with emerging ones such as unusual fund types e.g. social media / influencer payments, unusual payment methods such as crypto, as well as unusual behavioural cues such as reluctance to complete eIDV checks.

Not to mention the rising use of deep fake technology, allowing criminals to present as anyone, complete with identity documentation and biometric spoofing of liveness detection and voice authentication.

These technological innovations and changing social norms are enabling sophisticated money laundering schemes, requiring MLROs to quickly and significantly adapt their strategies.

Walking a fine line.

What’s an acceptable level of risk for one company will be completely different for another. Yet a custom approach to every customer interaction is neither smart nor sustainable. Regulatory authorities add to the stressful balance through heightened scrutiny, evolving regulations and ever-harsher penalties for non compliance.

MLROs must adapt and navigate by implementing unique guardrails and defining relevant actions tied to customisable risk assessments on sectors, clients and jurisdictions. This enables immensely better consistency in approach and by extension, allows for better management by exception. Leaving time for deeper analysis, broader collaboration, greater impact and less chance of falling foul of the regulator.

Coordinate and collaborate. 

The globalisation of financial systems has smoothed the way for the movement of illicit funds across borders, posing significant challenges for AML compliance.

The resulting web requires a coordinated approach to AML compliance, with MLROs playing a central role. Adding to this challenge, heightened concerns surrounding data privacy and cybersecurity make MLROs' roles harder still. 

To address the first issue regular coordination between MLROs across sectors helps everyone stay abreast of common blindspots and new laundering methods. Joint discussions of new red flags, challenges, complex cases and more enables shared learning as well as a united approach to policy advocacy if needed.

To address the second issue and bolster the perceived value of AML compliance, MLROs are building alliances with their internal compliance, cyber, fraud and operational peers. This broader approach to risk management supports data privacy requirements,  enabling better cybersecurity and overall organisational risk resilience.

Building risk hunting instincts.

Reliance on rulebooks or infrequent training has limitations when laundering methods evolve as rapidly as they currently are.

Much like cybersecurity training, which is now the norm in most organisations, AML training is best done in small but regular sessions, mixing web-based instructional learning with hands-on real-world case analysis and red flag recognition tests.

By positioning AML as everyone’s job, compliance is better understood, suspicious situations flagged and overall risk management is improved.

It also adds to the robustness of an AML programme that can better withstand regulatory scrutiny and minimise the risk of penalties and reputational damage.

The way forward.

Unusual times persist, and the solutions to these converging trends require an ever more sophisticated approach. An approach that heavily relies on the speed and intelligence only available through evolving technology. But it’s no good if the technology is irrelevant to your unique business. Instead, to make it an even playing field we must:

• Start by re-examining the true breadth of new risk factors and red flags.
• Then, reimagining and refining internal guardrails and actions,
• From there, working in closer collaboration with peers and associates both in- and outside organisational boundaries.
• Making everyone responsible for AML by building better risk spotting instincts.
• And finally, demanding and using interconnected technology that keeps pace with criminal activities and their ever evolving laundering methods.