The Complexity of Achieving Global AML Compliance

Achieving Anti-Money Laundering (AML) compliance on a global level for any multi-national Regulated Entity is a challenge. Also, when a Regulated Entity, such as Dealers in Precious Metals and Stones or Company Service Providers who have no branches in other countries but have clients and suppliers from countries other than where they operate, face challenges of navigating through global AML compliance requirements. This infographic sheds light on challenges faced by Regulated Entities in achieving global AML compliance.

The factors that make global AML compliance challenging are:

• Dynamic Nature of Financial Crimes

• • Criminals are always on the go for developing and devising new techniques to conduct Money Laundering (ML), Terrorism Financing (TF), and Proliferation Financing (PF) activities that help them evade regulatory consequences. This leads to Regulated Entities being unprepared in terms of developing methodology to mitigate new and emerging ML/TF and PF threats as they are yet to identify new red flags that might indicate a potential element of ML/TF and PF that alerts them in time for deploying adequate mitigation measures.

• Divergent Regulations

• • The laws and extent of AML compliance requirements vary in every jurisdiction, making it difficult for Regulated Entities to establish and continue business relationships with offshore customers and suppliers where AML laws in their jurisdiction differ in level of strictness from that of the Regulated Entity. This difference in stringency or leniency between cross-border or cross-jurisdictional AML requirements is tricky to navigate. AML laws of one country might prohibit Regulated Entities in their country from conducting business with individuals or entities belonging to a country with weak AML laws, leading to loss of business opportunities.

• Skills and Knowledge of the Compliance Team

• • AML laws in the majority of countries pose a regulatory requirement to conduct timely, frequent, and role-specific AML training, which, when it comes to implementation, becomes a challenge for Regulated Entities as AML training costs are expensive for the business. AML training is required and mandated by law to ensure that the skills and knowledge of the AML compliance team are in pace with emerging typologies and the dynamic nature of AML regulations.

• Technological Challenges

When it comes to achieving AML compliance, implementing technology is inevitable. However, with technology comes a set of challenges, such as the following:

• • Integration across different platforms: A Regulated Entity that has existing systems for automating their tasks often faces problems in integrating AML solutions with existing systems; this poses a challenge in achieving AML compliance goals.

• • Cybersecurity threats: All major countries face challenges of cybercrime such as data theft, identity theft, malware, ransomware, phishing attacks, third-party exposure, and social engineering, to name a few; some of these methods are used for furthering ML/TF and PF motives. This imminent cybersecurity threat poses a significant challenge in achieving global AML compliance.

• • Misuse makes way for the emergence of new typologies: Criminals and ML/TF and PF actors often misuse the international fintech framework to further their illicit motives. This misuse makes it difficult to achieve global AML compliance.

• Global Cooperation

• • Difficulties in uniform implementation of internationally accepted norms across overseas branches of Regulated Entities pose a significant challenge when AML laws of the home country itself are not aligned according to international AML standards such as Financial Action Task Force (FATF) Recommendations.

Conclusion

To conclude, the complexity posed by the factors discussed above poses a significant challenge in achieving global AML compliance.