As the coronavirus halts anti-money laundering enquiries by regulators, firms that use physical documents for transactions verification will most likely opt for tech to tackle the ongoing money crime.
“Technology can help watermark the verification processes because there are challenges in using documents for AML compliance when checking the sanction list that involves a million entities. A lot of small businesses don’t bother checking sanctions and are prepared to lose at a very low risk, but it’s a risk,” says John Dobson, CEO of SmartSearch.
Adopting artificial intelligence could “save clients a huge amount of time,” as its performs enhanced due diligence he adds.
As tackling the $800bn – $2trn across the globe will not be an easy task to accomplish during a global lockdown, Dobson calls for firms to adopt new technology processes.
“Embrace technology and sign up to an electronic verification service, because it would be madness not to do it.”
Social distancing has also added a great burden for organisations that use physical documents to do money laundering checks.
“Providers of service and finance cannot do face-to-face checks as they were doing previously. A lot of firms still use physical documents to prove someone’s identify, from an anti-money laundering regulatory viewpoint,” says Dobson.
“The problem with people in lockdown is that individuals are no longer in office; large organisations such as banks have a main money laundering policy which demands individuals for a physical proof of identity, but they are now closed.”
The UK’s Financial Conduct Authority (FCA) offered firms “flexibility” to comply with AML late March, but the lax approach from the regulator was considered a loophole for fraudsters that have sought to “create false documents” as the regulation loosened.
The FCA said firms could “accept scanned documentation sent by email, preferably as PDF,” a measure “almost like a money laundering charter,” says Dobson as he suspects criminal gangs will now “work 24/7 on creating false identities.” This came as a surprise while the 5th Anti Money Laundering Directive (5AMLD) published in January ensured organisations should use electronic verification where available.
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Despite investigations falling short during the pandemic, the European Commission has reiterated its ambition to tackle money-laundering in a statement published last week. Brussels said it designed a “comprehensive approach to further strengthen the EU’s fight against money laundering,” as it released its Action Plan aimed at coordinated EU’s rules to combat the ongoing crimes.
Dobson criticises the FCA’s lack of mandatory policy for electronic verifications pre-lockdown, but expects the EU’s 6th Anti Money Laundering Directive to “correct what was wrongly done in the 5AMLD and make electronic verification compulsory,” believing it would “stop the FCA from having to invent new AML compliance procedures.”