The REGTECH Book

Will Financial Institutions Ever Achieve a 100% Compliance with Anti–Money Laundering and Combating the Financing of Terrorism Rules?

By Marcel Krist

CEO and Chairman, Photonfocus AG and Managing Director, KYC Exchange Net AG

The International Monetary Fund (IMF) explicitly states that money laundering and terrorist financing are financial crimes. Consequently, regulators in the different jurisdictions seek to outperform the anti–money laundering (AML) and combating the financing of terrorism (CFT) rules developed by the IMF’s Financial Action Task Force (FATF) with more localized, specific, and stringent regulations.

Financial institutions (FIs) are cognizant of the rules, specifications, and, more important, consequences of non-compliance and non-mitigation. Compliance officers and risk managers acknowledge that they must comply with AML/CFT rules globally around the clock (24/7) in each legal entity and branch. However, taking a closer look, some FIs are ‘managing’ the AML/CFT regulations like fare dodgers. Regulations are deliberately ignored, and funds are set aside (as AML accruals) in anticipation of potential future fines.

So, how can regulators enforce the law and ensure an appropriate application of the AML/CFT rules, and what are the tools at their disposal? At the same time, do IT vendors offer appropriate know your customer (KYC) and client due diligence (CDD) tools and platforms to fight financial crime? Do they need to become more disruptive to the processes ...