Compliance Interview Series
with Esman Kurum
Esman Kurum , AML & Forensic Adviser at KPMG
1. Could you explain the concept of money laundering in simple terms?
To keep it simple, I would say that money laundering defines the process of disguising the origin of funds coming from illegal or criminal activities in order to make them look legitimate and thus use them in the global economy in a conventional way.
2. What is the biggest challenge in this sector?
When it comes to anti-money laundering, I think the biggest challenge in this sector remains the significance of technological evolution, which is one of the main reasons why AML regulation is evolving at an increasing pace nowadays. On the one hand, it allows criminals to strengthen their level of adaptability when it comes to laundering money or financing terror more easily, by taking advantage of new technologies (e.g. encrypted messaging apps) or types of assets (e.g. cryptocurrencies). On the other hand, obliged entities and professions that must comply with AML/CFT regulations have to embrace innovation in order to make their AML framework more efficient, for instance by using machine learning for KYT purposes. For these reasons, technological evolution is paradoxically both a solution and a threat for AML.
3. How can AML or KYC or KYB benefit from the blockchain technology?
Blockchain could definitely help with streamlining AML processes, maintaining up-to-date AML/KYC data and cutting AML compliance costs.
4. How can governments stop money laundering? What do you think, can they?
My personal opinion is that money laundering being stopped once and for all is quite utopic. However, it is not a reason not to fight against it. I think governments have a significant role to play when it comes to fighting against financial crime since they may, in a lot of situations, have access to much more information than the private sector alone, and information is gold when it comes to AML. Nevertheless, the private sector gathers many professionals with priceless expertise. This is why I guess public-private partnerships should be fostered, especially with regard to AML. Governments should also be more aware of new technologies that can be applied to AML as soon as possible in order to provide better guidance to obliged entities.
5. If everything went to digital money and cash was no longer accepted, how will it change the AML process?
Everything going digital would certainly put the focus on ever more remote AML controls, which is why the European Union has been working on digital identity (e.g. eIDAS) and remote onboarding solutions lately. Also, the covid-19 pandemic definitely accelerated these discussions. The end of cash money will not prevent criminals from laundering money, it will only change the way it is laundered. In that respect, AML processes would address the growing use of virtual assets and digital identities.
6. Why is money laundering bad for the economy? What is the worst effect?
It is obvious that money laundering is a bane to the economy, mainly because it represents a shortfall for governments in the case of aggravated tax evasion and tax fraud for instance, which are by the way predicate offences to money laundering in jurisdictions such as Luxembourg. However, the human cost is to me the worst effect of money laundering. Indeed, money is often laundered in cases of human or sex trafficking, which, in the end, is of course detrimental to the whole society. All in all, money laundering is not only about money.
7. What are the risks and benefits of cryptocurrency in the AML?
The major risks implied by the growing use of cryptocurrencies for AML are the greater anonymity they may allow, and their lack of regulation. Talking about benefits of cryptocurrencies for AML, the only one I can think of is the fact that their democratization is likely to make cash transactions less and less frequent over time, enabling better traceability of transactions, although it will not solve the issue of money laundering, but only change it.
8. What is an essential qualification of an anti-money laundering officer?
9. How has anti-money laundering changed over time?
Anti-money laundering was at the very beginning solely perceived by most financial institutions as a bureaucratic obligation, a tick-box exercise, due to the limited regulations that existed at that time. Nowadays, with the increasing regulatory pressure and the recent money laundering scandals leading to financial penalties, AML starts to be taken more seriously by obliged entities, although there is still work to be done, especially when it comes to performing AML/KYC analyses which are sometimes still designed as a mere tick-box exercise.
10. Have you any recommendations to fintech startups about the AML process?
I would strongly recommend fintech startups to make their AML policy a top priority as we are seeing more and more deficiencies being pointed out by regulators.