Firms need to re-engineer their anti-money laundering (AML) systems and controls to refocus on know-your-customer (KYC) processes to prevent the inevitable pile-up of transaction monitoring alerts. Firms' pivot to digital onboarding has prioritised speed over collecting enough information to determine whether transactions are suspicious. It has created an inefficient, expensive process where AML analysts are sifting through thousands of alerts looking for the proverbial needle in a haystack. The problems raise important questions about the ways that banks conduct AML controls today.

Some banks, in an aim to onboard customers digitally in less than 24 hours, rely on tools that verify identity-based on existing information. These verification tools use customer addresses, credit bureau information, previous bank account details to risk score applicants. Some banks do not ask for photo identification, like a driver's licence or a passport, for customers deemed to be low risk.

In this episode, Alex Robson, managing editor, Regulatory Intelligence, talks to Rachel Wolcott, senior editor in London, about KYC processes and how they should be done. Also under discussion is Russia, Iran, the UK Financial Conduct Authority's latest sanctions compliance work, together with that of the Association of Certified Anti-Money Laundering Specialists.

The "Compliance Clarified" podcast series covers the wide range of topics which affect compliance at financial services firms, and aims to help compliance officers make sense of the often-challenging regulatory environment. It considers the big challenges of the day and offers practical ideas for emerging good practice.

Programme notes

Outside Regulatory Intelligence paywall

Firms should invest in KYC, model "good" customer transactions to reduce transaction monitoring alerts pile-up: https://regintel-content.thomsonreuters.com/document/I42A1B9D0F8A911EDBEBCFA0963B51F96

UK FCA finds gaps in firms' sanctions testing; ACAMS highlights complex evasion and Wagner Group risks: https://regintel-content.thomsonreuters.com/document/I26903170FB2111EDBEBCFA0963B51F96

U.S. imposes counter-terrorism sanctions on Iranian operatives over alleged overseas assassination plots: https://regintel-content.thomsonreuters.com/document/IDFB1330000A511EE8F64E998879AFF30

Inside Regulatory Intelligence paywall

U.S. imposes counter-terrorism sanctions on Iranian operatives over alleged overseas assassination plots: http://go-ri.tr.com/aR6rOI

U.S. government issues broad new Russia sanctions, shares new export control evasion 'red flags': http://go-ri.tr.com/REz0nu

UK FCA finds gaps in firms' sanctions testing; ACAMS highlights complex evasion and Wagner Group risks: http://go-ri.tr.com/8svY1k

UK FCA using home-grown tool to check sanctions compliance: http://go-ri.tr.com/3khGhR

Government intelligence sharing vital to help banks spot Russian sanctions evasion -U.S.,UK officials: http://go-ri.tr.com/Q9urHj

Compliance Clarified is a podcast from Thomson Reuters Regulatory Intelligence.
Listen to wide-ranging, insightful discussions on all things compliance for financial services firms. We delve into the hot topics of the day, the challenges faced and offer up practical ideas for emerging good practice. We de-mystify regulation and explore the art, as well as the science, of the ever-expanding role of the compliance officer. Enforcements, digital transformation, regulatory change, governance, culture, conduct risk – anything and everything impacting the compliance function is up for discussion.

Listen To This If You're Dealing With Rejection