Money laundering is endemic in many parts of the world and undermines governments economies globally. According to the United Nations, money laundering represents 2-5% of global GDP and countries of primary concern include Russia, UK and USA. The regulations are ramping up, the EU’s Fourth Anti-Money Laundering Directive is a good example of the increased regulatory supervision and is called “the most sweeping AML legislation in Europe in several years”.
Fourth EU AML Directive
Trapets, a leading Swedish surveillance and compliance supplier, recent AML white paper concluded that, “The 4th EU AML Directive will soon be implemented in the EU member states (should be compliant by 26 June 2017) and we all have the obligation to comply with the new legislation. How the impact will be for precisely your business depends on what business you have. To know your customer and monitor behaviours and transactions is a key issue for obliged business proprietors.”
The white paper lists the key changes in the 4th directive:
- Emphasis on ultimate beneficial ownership and enhanced customer due diligence (CDD)
- Expanded definition of a politically exposed person (PEP)
- Cash payment threshold lowered to €10,000 but can be lower on a National level
- Expanded to include entire gambling sector beyond just casinos AND tax crimes
- Enhanced risk-based approach, requiring evidence-based measures.
With increased regulation, the need to Know Your Customer becomes critical. Tapet list the critical questions on each transaction that “should be risk assessed by the business proprietor”:
- Where does the money come from?
- Why is this transaction done?
- Who is doing the transaction?
- With whom is the transaction done?
And that, “If there is a suspicion that the transaction could be money laundry or terrorism financing all business proprietors are obliged to report it without delay to the financial intelligence unit (FIUs). Regardless of whether they have completed the transaction or had the opportunity to decline. All reporting is confidential.”
Need for real-time transaction monitoring
Recently Australia’s regulator accused Commonwealth Bank of failing to “report on time or even at all millions of dollars in suspicious transactions and didn’t monitor customers to manage the risks even after it became aware of suspected money laundering” (Wall Street Journal). Apparently it contravened Anti-Money Laundering and Counter-Terrorism Financing Act more than 53,700 times which shows the need to monitor transactions in real-time.
But this need for real-time transaction monitoring is not just restricted to banks, multi-national corporations need to do it too. This can only be achieved by the use of some form of AML risk monitoring platform such as Trapet’s.
CTMfile take: Trapet’s white paper is worth a read for the structured analysis of how to tackle the AML problem.
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