3 Hot Topics for Anti-Money Laundering (AML) in 2021

AML Hot Topics

On Thursday, February 25th at 14:00 GMT, IGCA will be hosting its first-ever webinar, focusing this time around on current trends in #AML. Feel free to join us by booking your spot HERE. Hope to have you with us next week!

2020 was a year unlike any other in recent history.

The COVID-19 pandemic brought the world to a standstill, temporarily shutting down economies while transforming the way companies carry out their business.

An important result of this crisis was the acceleration in the adoption of technological and digital solutions, tools that impacted the way businesses manage their AML policies and processes.

For instance, artificial intelligence (AI) and smart identification and verification (IDV) made plenty of inroads in helping companies follow through with their KYC and customer due diligence processes this past year.

As succinctly put by Northrow’s CEO Adam Holden, “With the pandemic driving rapid change to the way we interact businesses have now gained confidence in adopting digital technology at a far greater and quicker rate.”

With COVID-19 seemingly reaching a turning point as more people are inoculated and more pharmaceutical companies add their contribution to this battle, what’s in store for AML in 2021?

Here we summarize some of these hot topics with the help of some our panelists!

Smart Digital Identification & Verification (IDV) Solutions Grow in Importance

In 2021, smart IDV solutions will continue to gain prominence, providing financial services companies and institutions with a wide array of tools via which to carry out their KYC and CDD.

With KYC and CDD having to be performed not only on clients but also on third-party service providers, employees and other professional partners and the amount of information that needs to be collected becoming more burdensome, smart IDV is primed to help alleviate this process.

According to Sujata Dasgupta, Global Head of Financial Crimes Compliance at Tata Consultancy Services Ltd., in Sweden, “niche solutions catering to IDV of each KYX segment are now poised to make their mark in the next couple of years,” helping firms breakdown KYC and CDD processes for each group and complying more effectively and efficiently with each.

The US’s New Rules on AML

At the beginning of 2021, the US Congress passed what’s shaping up to be one of the most consequential AML laws in decades.

The Anti-Money Laundering Act of 2020 officially ramps up the beneficial ownership disclosure requirements for corporations and LLCs setting up in the US and provides greater incentives for corporate whistleblowers to step forward with information on activities involving money laundering or other financial crimes.

As explained in The National Law Review, this set of regulations “imposes new ultimate beneficial ownership reporting requirements on certain U.S. state-law-organized corporations, limited liability companies, and other similar entities formed under the laws of a foreign country that register to do business in the United States,” requiring all relevant parties to “submit, as part of the company formation or registration process, a report to FinCEN that includes specific identification information for each beneficial owner.”

This regulation will also result in the creation of a non-public register of beneficial ownership to be managed by FinCEN. The information collected in this database can be accessed by financial institutions and governmental agencies on a case-by-case basis with authorization from the US’s main money laundering and financial terrorism watchdog.

Similarly, the 2020 AML Law provides greater financial rewards and security from employer retaliation for whistleblowers.

According to BakerHostetler’s article on JDSupra, the new law allows whistleblowers to “file a complaint with the Department of Labor when AMLA anti-retaliation rules are violated,” and “Treasury to pay AML whistleblowers 30% of any monetary sanction recovery (excluding forfeiture, restitution and victim compensation) when (a) the whistleblower voluntarily provides “original information” that leads to a successful enforcement action and (b) the sanctions exceed $1 million.”

Stricter Fines and More Sentencing for the Guilty

Higher fines and a greater number of guilty verdicts have been handed out in AML cases in recent years and this increase does not seem to be stopping any time soon.

Since 2017, writes iSpiral, a company developing tech solutions for AML and KYC reporting, fines have been doubling in size with $8.14 billion accrued in 2019 alone after having collected about half of that amount the previous year.

With the EU’s 6th Anti-Money Laundering Directive, which became effective in December of 2020, the number of fines and guilty parties is only bound to increase.

Under the 6th AMLD, criminal liability has been expanded to include legal persons such as companies and partnerships. As summarized by Comply Advantage, another company designing tech solutions for the AML world, with this new caveat, “the new rules will place AML/CFT responsibility on management employees along with employees acting separately. “

This particular part of the rule will put extra pressure on companies to more closely monitor their employees and pay greater attention to compliance with AML regulations.

Likewise, any party found guilty of AML and CFT will receive a minimum of four years in prison, up from one in prior iterations of this law, and judges will be able to fine persons involve in money laundering and deny corporations access to public funding.

Sandip Patel, QC FCIArb, Managing Partner with Aliant Law in the UK and one of the panelists in our upcoming webinar, summarizes many of these issues nicely.

Speaking to IGCA, Patel said, “The AML regulatory environment is constantly evolving, so AML compliance efforts need to keep pace. As the trend of a risk-based approach to AML legislation continues on a global level and following a raft of new regulatory changes, such as the EU’s AMLD 4/5/6 and the US Anti-Money Laundering Act of 2020, the challenge for regulators and firms is sustainable compliance.”

As a result, Patel added, “There will be greater emphasis on the adoption of technology such as artificial intelligence, machine learning and cognitive processes in financial crimes compliance and the modernization of outdated AML regimes.”

Now it’s time for you to share some of your main questions with our three panelists!

If you have anything specific you’d like them to cover on February 25th, then submit your question(s) in the comments section below.

For anything else, do not hesitate to reach us at info@igca.org. We’d be happy to help.

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