De-risking continues but AML software can help with heavy lifting to reverse trend


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De-risking trend due to AML Compliance continues

At the G20 Summit last week, the international Financial Stability Board delivered its report to the G20 nations about the mounting risks of the continuing decline in correspondent banking relationships. Concerns about costs and risks associated with AML Compliance are driving de-risking, but using a Risk-based Approach and top AML software solutions can help reverse this dangerous trend.

The FSB reports that “according to data from SWIFT the number of active correspondent banking relationships declined by 6% across all currencies between 2011 and 2016 with Eastern Europe (-16%), Europe (ex Eastern Europe) (-15%), Oceania (-12%) and the Americas (ex North America) (-8%) the most affected. In 2016, the Caribbean and the small states of the Pacific (Melanesia, Micronesia and Polynesia) are the four sub-regions with the highest rates of declines, close to or above 10%.”

The consequences of this decline in correspondent banking relationships include a greater concentration “where countries and banks rely on fewer correspondent banks,” and the need for more intermediaries in the absence of direct correspondent relationships lead to longer payment chains in the processing of each payment.

FSB has warned in the past that the failure to improve access to correspondent banking in underserved jurisdictions “may affect the ability to send and receive international payments or drive payments underground with potential adverse impacts for trade, growth, financial inclusion, financial stability and the integrity of the financial system.”

Capacity-building, AML Software Solutions can help reverse de-risking trends

To that end, FSB is working with international bodies like FATF to clarify regulatory expectations, provide more and better guidance, support AML capacity-building efforts in respondent banks in underserved jurisdictions, and strengthen tools for due diligence in correspondent banks.

Strengthening tools for due diligence and AML Compliance has been the focus of AML Partners’ CEO Frank Cummings for the last decade, and he lauds the FSB’s focus on improved tools and capacity building as the key to derailing the de-risking trend.

“We regularly work with banks in jurisdictions threatened with de-risking, and our best advice is to embrace best-practices AML Compliance independent of what those around you are doing,” Cummings said. “And we deliver AML software that does the heavy lifting for you. It’s what we have been obsessing about for nearly a decade—delivering end-to-end AML Compliance solutions that help you dot your i’s and cross your t’s—every one of them—with step-by-step best-practices facilitated within the software.”

Cummings recalls with a cringe the recent past of AML Compliance when jammed manila folders and myriad file cabinets were the nerve-jangling tools of the trade.

“Those were sometimes wing-and-a-prayer days for institutions faced with mountains of paper and swelling regulations,” Cummings said.

“Now every institution can afford AML Compliance software that turns their Risk-based Approach into an effective and efficient digital powerhouse where finely grained CDD on-boarding is instantly evaluated for dynamic risk, sanctions issues, and adverse media,” he said. “And our AML ecosystem melds that KYC/CDD data and risk analysis with transaction monitoring and attendant sanctions screening. And we offer a subpoena-search function and provide automated interfaces for each institution’s data subscriptions. It’s integrated end to end, and it delivers a fully digital version of your complete Risk-based Approach.”

That level of integration and comprehensiveness so deeply grounded in the logic of risk-based AML will help allay the fears about risk and expense that have spurred so much of the de-risking, Cummings said.


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