Over the past year, we have observed the impact of COVID-19 in almost all sectors. Finance has undoubtedly been the sector most affected by the epidemic. As banks took action to reduce the financial implications of working from home and pandemic processes, more responsibility fell on compliance teams.
Many compliance teams stuck in traditional technology came under financial pressure. Besides, they had difficulty keeping up with the new developments that had emerged. Finally, such compliance teams fell behind in implementing effective Customer Due Diligence requirements.
It became clear that the strategies determined for 2021 should be based on more up-to-date information. All financial institutions must take a risk-based approach, drawing lessons from the past.
This article discussed AML compliance trends that banks and other financial institutions should follow in 2021.
NDAA Brings New AML Regulations With It
The AML status has changed drastically as a series of new regulatory actions as the National Defense Authorization Act (NDAA) for 2021 comes into effect on January 1, 2021. The NDAA is the most comprehensive change since the adoption of the US Patriot Act.
The NDAA is essential in helping financial institutions focus on government-based AML resources and comply with advanced technology adaptations for BSA compliance.
It is also a requirement to recognize that the financial crimes enforcement network requires a very long time to complete many rules - such as Customer Due Diligence - to prevent money laundering.
Therefore, businesses should understand the importance of rulemaking and a strategy to engage with the government to meet these enforcement requirements that must comply.
UBO Laws Had More Transparency in 2021
Efforts to develop a more incredible culture of transparency also give Ultimate Beneficial Owner (UBO) laws more clarity. Thus, all victims of the money laundering process will be aware of the illegal flow.
Also, Ultimate Benefical Owners' more transparent momentum will provide clearer visibility into a financial transaction for banks, regulators, and governments. As this visibility increases, they will implement better Customer Due Diligence checks to reduce money laundering.
However, it is determined that not all countries and parties are willing to comply with this concept. Since some countries, such as Switzerland, do not plan to accept UBO registrations, it is anticipated that financial criminals in these countries will have easy access to shell companies next year.
The illegal activity rates in these countries will increase. At this point, it would not be wrong to say that global tension awaits us between countries that comply with and do not comply with UBO laws.
2021 Will Be The Most Effective Year of AI
One of the primary responsibilities that compliance officers should undertake during the COVİD-19 process is managing the remote compliance team and thousands of people.
After all, the security of many financial institutions in such a period goes beyond physical barriers. Therefore, a remote and holistic digital infrastructure must be created to meet security and compliance requirements.
However, businesses need to reconsider their compliance policies and solutions prepared for their needs. Applications should be updated by considering the remote workforce. However, such changes can happen gradually. Therefore, businesses need to roll up their sleeves and take the necessary action steps.
Artificial intelligence technology can assist in this regard as in many other matters. Through artificial intelligence, the need for human consent becomes less urgent, especially in cases related to the prevention of money laundering. Artificial intelligence will never replace human beings, reducing the need for human approval and accelerating many aspects of AML.
Financial Crimes Have Started to Digitalization
Although COVID-19 has had various negative impacts in many areas, it has promoted digital banking services. However, criminals have been improving their methods at the digital level. In addition, the increasing interest in virtual currencies makes it easier to access the financial system and becomes a new way for financial criminals.
At this point, financial criminals focus especially on digital currencies such as crypto money. Therefore, strict restrictions will be created to prevent money laundering in the digital world of finance. During this year, all financial institutions, especially virtual asset providers, should follow and comply with KYC requirements for virtual assets, fiat currencies, custody wallets, and all areas of the digital financial market, such as prepaid cards.
In Sanction Scanner's Expected AML Trends in 2021 Report, Compliance Manager Sercan Karapoyraz emphasized that besides digitizing the processes, investing in high-technology resources and experts will bring customer-oriented and straightforward solutions. He also stated that alternative payment methods and digital services contain some threats in the current compliance environment.
