AML Record-Keeping Challenges and Solutions

Financial crimes, such as money laundering, financing terrorism, and proliferation financing (ML/FT and PF), disrupt the integrity of the financial sector. To combat these illicit activities, businesses adopt robust Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) measures, which are aligned with the regulatory framework.

As part of the regulatory framework, keeping records of AML activities and measures is an important element of effective AML/CFT measures. However, maintaining records is faced with multifaceted challenges, obstructing businesses from adopting comprehensive AML compliance.

By addressing challenges in AML record-keeping and implementing their corresponding solutions, businesses can easily remove obstacles, implement effective AML record-keeping frameworks, and improve compliance with regulatory requirements.

Here’s a breakdown of each challenge and its corresponding solution:

1. Volume and Complexity

• AML records are comprehensive data that include information relating to customer due diligence, transactions, ongoing monitoring, suspicion reports and internal policies, procedures, and controls. Thus, handling the large volume and complexity of AML records becomes challenging for businesses.
• To overcome this challenge, businesses can use document management tools to standardise record-keeping processes across their operations.

2. Regulatory Variations

• With the advent of globalisation, businesses operating in multiple countries require navigating diverse regulatory frameworks and compliance requirements. Similarly, adherence to different regulatory requirements regarding the duration of record-keeping becomes challenging.
• For this, businesses should develop a flexible system based on a comprehensive global AML/CFT compliance framework, which can accommodate regulatory variations, such as maintaining records for 5, 6, or 8 years required by specific jurisdictions.

3. Data Security Concerns

• Keeping a large amount of data requires effective security measures. Businesses face challenges in ensuring the security of sensitive AML data.
• Businesses can implement encryption, limit access controls, and conduct regular audits to safeguard against any unauthorised access and tackle data breaches.

4. Storage Issues

• As mentioned, AML records consist of a large volume of data and information. Managing such a volume physically requires storage space. Additionally, the physical keeping of data makes the search for information difficult.
• Transitioning to cloud-based storage solutions can help businesses eliminate the need for physical storage and provide scalability and accessibility. Further, searching through such volume data becomes easier when kept online by using keywords, titles, etc.

5. Privacy and Consent

• Maintaining records needs permission from the person to whom such information belongs. However, people have privacy concerns about data usage and retention and obtaining consent from them is not easy.
• To maintain trust with people, businesses should establish clear data usage and retention policies which comply with relevant privacy regulations. Further, when obtaining consent from individuals whose data is being collected, explain to them the privacy policy and security measures employed for data protection.

6. Data Retrieval

• Although it is easier to search data online. However, retrieving accurate data when needed through such a large amount of data online is complex.
• Efficient retrieval of data, whenever needed, requires implementing a robust document management system that has advanced search capabilities to facilitate quick and accurate data retrieval tools within it.

7. Data Quality and Accuracy

• While undertaking AML measures, businesses collect information from various sources. However, not all information is relevant or accurate. It becomes challenging to segregate quality and accurate data from large amounts of AML.

Thus, to verify the integrity of AML data, businesses may implement effective quality management procedures that establish quality standards, employ quality assurance policy, undertake quality control, and conduct regular audits to see through gaps and improve the overall procedure.