As the war in Europe rages on, financial crime risk managers face a greater onus than ever before. However, some managers are still putting off improving their compliance practices, citing cost as an excuse. But the reality is that the cost of non-compliance is much higher.

Any breach of Australian sanction laws can result in imprisonment or heavy penalties. Not to mention reputational damage, which is often irreversible.

Below we examine five key areas in AML/CTF (Anti-Money Laundering / Combating the Financing of Terrorism) risk management that every manager must consider.

1. Ongoing risk assessment

It is essential to understand what risk your business is exposed to by keeping an up-to-date and detailed risk assessment which includes information on customers, products and services offered, transactions conducted and the jurisdictions that are being dealt with.

A dynamic risk assessment is key in setting the risk appetite for your institution. Your business compliance program should also reflect what measures are in place to mitigate outcomes of the risk assessment.

2. Awareness and capacity building

Make sure all key employees, senior management and the board of directors are included in the business awareness programs. Keep them updated on the risk assessment findings, latest news on sanctions, what control measures are in place and finally, don’t forget to add a quiz to ensure all are onboard.

3. Unveiling the corporate veil and knowing your customer’s customer

The greatest challenge in implementing sanctions regulations is uncovering beneficial ownership and understanding complex corporate structures that are in place to obscure ultimate beneficial owners (UBOs).

Know Your Customer’s Customer (KYCC) is the process of going that extra mile to identify a customer’s clientele and their activities for better risk management. Although KYCC is not a regulatory requirement, it helps to mitigate any risk of misuse of shell and dummy companies and financial crimes.

Keep all the KYC information up to date and do not expect the sanction screening solutions to work miracles with outdated KYC data. Make sure to allocate adequate resources including tools to manage these risks.

4. Sanctions screening and escalation

One of the most important tools that an institution needs in this day and age is a robust sanctions screening solution. A common misconception on sanctions screening is that it’s only required at the point of onboarding a customer.

Sanction lists are constantly updated, KYC information is constantly evolving, and corporate structures change. That is why regular screening of a customer base is essential following a risk-based approach. And don’t forget to document sanctions screening and escalation procedures.

5. Periodic testing, auditing and review

With all the processes, procedures, tools and documentation in place, is your business actually doing a good job in terms of AML risk management?

To determine this, it is necessary to conduct periodic testing, auditing and reviews to safeguard your business from unwarranted regulatory breaches. Based on the outcomes of these exercises, further improvements can be introduced to strengthen AML risk management functions.

illion can help you achieve AML compliance

We offer a comprehensive suite of AML products, services and expertise to help your organisation manage risks.

With our portfolio analysis capability, we can assess your AML risk and provide a customer portfolio overview, which includes a portfolio risk assessment, and charity risk and AML risk indicators.

Our AML remediation process is enriched with illion’s extensive data sources, and our proprietary matching uplifts KYC data, enabling you to comply with all Ongoing Customer Due Diligence (OCDD) requirements. We can identify Ultimate Beneficial Owners (UBOs) and unravel complex corporate structures of non-individual customers.

We have partnered with many industry leaders and can provide sanctions screening solutions tailored to your needs.

In the case study below, we demonstrate how we added value to our client’s AML/CTF compliance program.

Case Study – PEP and sanctions screening

What was the problem?

Ongoing regulatory compliance was one of this bank’s main priorities. In recent reviews of their AML program and consultation with AUSTRAC, the bank identified a number of areas which required attention. As illion had a longstanding relationship in supporting this bank, the bank’s executive leadership team reached out to illion to assist them with their AML obligations.

The bank had continually faced challenges implementing an efficient program to comply with AML/CTF. Some of these challenges included having an adequate process to identify, verify and manage high-risk customers at the point of onboarding, as well as having a single aligned view of their customer’s profile and risk on an ongoing basis across their 100k+ customers.

Why was illion chosen?

The bank appointed illion to provide AML solutions (in partnership with Acuris Risk Intelligence) based on the following:

  1. illion’s insights and knowledge of the banking sector’s systems, data, processes and people.
  2. illion’s responsiveness and willingness to explore a range of tactical and strategic solutions that met the bank’s requirements and compliance considerations.
  3. illion’s solution would enable the bank to better identify both domestic and foreign individuals and entities (and the individuals behind them).
  4. illion’s solution would reduce the false positive rate, deliver higher match rates for both individuals and non-individuals and reduce the manual input previously required by the bank’s employees.

How did illion assist?

illion and its partner implemented a new PEP and sanctions screening solution that was tailored to the bank’s individual requirements, facilitating the absorption of historic customer data and implementing a centralised solution across the business.

A post-implementation review of illion’s solution showed a significant reduction in the number of unique customers returning PEP and sanctions matches requiring further review. This indicates a considerable improvement in both the efficacy and efficiency of this solution, above and beyond the system formerly used by the bank.

For more information on how illion’s AML/KYC solutions can help your business, or if you have any questions, please contact your account manager, or the customer support team at customersupport@illion.com.au.

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