There’s no denying that the economic fallout of the COVID-19 pandemic has troubled the banking sector. In the midst of revenue losses and stiff competition for new customers, a bank’s current priorities may lie in launching new products or innovating on its customer loyalty programs. But while initiatives like those are undoubtedly very important, there’s one aspect of operations that banks shouldn’t lose sight of in the current time: their anti-money laundering (AML) compliance.
Truth be told, money launderers and other financial criminals actually thrive in chaotic times like these. Some organized networks have already begun using the uncertainty of the pandemic as a smokescreen for their nefarious activities, like fraud and illicit transfer of funds. There’s no better time than now for your bank to revitalize its compliance AML program, as your adherence to the most up-to-date regulatory guidelines could be your best protection against the taint of financial crime.
It may be a challenge to redouble your compliance efforts in the midst of all the other things you need to do, but it will be worth it for your bank in the near future. To that end, here are the four things you need to do in order to stay AML compliant—and to improve your compliance efforts—in the present day.
Study the Latest Issues on Financial Crime
The first thing you need to be aware of is that particular modi operandi have cropped up during the pandemic. The banking industry has recently been plagued with imposter scams, orchestrated by fraudsters who pretend to solicit donations on behalf of either a legitimate or a fake COVID-19 relief charity. Another threat to the banking system is money mules who either knowingly or unknowingly transfer illicit funds for money laundering networks. Some declare this suspicious new income as part of the earnings they get from new work-from-home jobs.
Knowing that threats like these exist, you should warn your banking staff about bad actors being on the loose. In addition, you should also tell your legitimate banking customers to be very careful about their finances, lest they cross paths with malicious agents like these.
Brush Up on the Latest Regulatory Guidelines for the COVID-19 Situation
There’s also the need to keep track of new regulatory guidelines and action points that have been issued specifically for the COVID-19 situation. One timely example is the Financial Crimes Enforcement Network’s (FinCEN) Red Flag Indicators of Financial Crimes Related to Economic Impact Payments (EIP), which was released in February of 2021. FinCEN recommends that banks and other financial institutions perform additional investigations when red flags like the following appear:
- Transactions involving counterfeit US Treasury checks;
- EIP-related deposits from other geographical areas;
- Rapid transfers or disbursements of EIP funds from only one account;
- Multiple EIP disbursements to the account of a person under 17 years of age, and;
- Rapid EIP disbursements to business entities in which the account holder is neither a payee nor an endorser of the business.
In cases like these, banks should gather evidence of suspicious activity and follow FinCEN’s instructions for filing Suspicious Activity Reports or SARs.
Suffice to say, you should keep abreast of the newer guidelines and the rationales as for why they’re in place. Staying abreast of regulatory guidelines will keep your AML response from being obsolete and vulnerable to the predatory actions of criminals.
Invest in an All-Around AML Solution
You’ll also want to invest in AML compliance software that possesses two key strengths: a 360-degree vantage point so as to detect unusual money movement patterns in real-time, and an adeptness at managing data to fit regulatory requirements. In the case of the FinCEN regulations mentioned above, you can look for a solution that utilizes scenarios for rapid detection of funds. But of course, it shouldn’t stop at that; ideally, your solution should be scalable enough so that new scenarios and new parameters for meeting regulatory guidelines can be added to it as necessary.
If these two conditions are met by your new solution, your AML compliance will be much more efficient and, at the same time, the chore of regulatory reporting will become a lot easier for you. The solution will be a good investment if you can meet your regulatory requirements and, ultimately, improve your bank’s capacity to detect alarming patterns or otherwise hidden webs of customer relationships.
Make a Plan for Augmenting Next-Generation Technology into Your Current AML Program
Most banks regard AML compliance as a race, but you should remember that you do not have to modernize all your AML systems overnight. One of your goals should be to implement an up-to-date AML compliance program while properly easing your bank into the digital era and mitigating tech culture shock or business disruption.
If you intend to incorporate next-generation technology like machine learning and graph analytics capabilities into your compliance program, draft a roadmap that will make implementation operable. You can determine milestone years and an annual budget for AML system upgrades. These will definitely be good for the future of your bank, but their introduction into your core banking system should be planned properly.
The best preparation for your future compliance efforts is a forward-thinking and holistic AML approach. Again, this will do more than protect your bank’s assets—and in addition, your customers—from the wiles of financial criminals. It will also safeguard your bank’s growth and its public image in light of present-day circumstances.
Do your best to improve your current AML program, and use compliance to your advantage in navigating the difficult situations brought about by COVID-19. Make the move to bolster your AML compliance program now!