$2trn a year because of Poor ID&V
$2trn a year in the proceeds of money laundering is being enabled by firms lack of basic ID checks and document verification. Fraudsters right up to organised crime gangs are exploiting small and large firms lack of adequate controls.
These figures are more alarming when you consider that this money facilitates terrorism, sex, people and drug trafficking as well as other heinous acts. This means all sectors have to be more vigilant and play their part in the money laundering processes, no matter how pointless it may seem to them at the time. Organised crime are not stupid and can create layers of businesses that obfuscate the true Beneficial Owner. Although they are not stupid, many of the people they use can be, and sometimes make innocent slips, that when reported to the NCA, help complete the bigger picture.
However, many people are still unmoved by the links to underground activities, or the misery it causes thousands of people each day, so perhaps the threat of fines should be? In the fist six months of 2021 over $1billion in fines were levied for anti-money laundering failures across the UK by the Financial Conduct Authority (FCA) and EU. Fines like these are levied from global regulators who are seemingly constant in fining firms for breaches in anti-money laundering, which are shockingly high in the EU and UK. The regulators pile on the pressure for firms to improve and implement controls and barriers against these financial crimes.
These huge, and in many cases increasingly large fines, are an obvious sign that all the regulators are united in their treatment of lax processes or understanding. The fact that the FCA is pursuing a criminal case against NatWest in the UK is evidence enough that these failings will no longer be tolerated.
Monzo, the start-up digital lender, has recently revealed that they are under scrutiny by the FCA over alleged breaches of AML regulations. This degree of scrutiny suggest that Know Your Customer (KYC) processes are often not able to keep up with the planned or sporadic business growth, in the hunt for greater market share and effective margin accrual.
Unfortunately another indication that some of the people used to set up these systems, for whatever reason, be it incompetence, restricted budget, or no full understanding of the scalability required, evidence that they do not understand the firms, or individual’s roles in the ongoing battle with global financial crime.
The fines mainly relate to shortcomings in AML management, inadequate suspicious activity monitoring and poor, and even non-existent or ‘light touch’ customer due diligence when onboarding new customers.
We provide free AML introduction training PDFs for all new start-up clients and MLRO training is available.