Posted on May 22, 2019 by staff

Tech must fight €1.87 trillion AML problem


Doing business internationally is no easy feat. Aside from the standard logistical challenges, organisations need to take into account a raft of legislative, political and cultural considerations.

Developments in technology and communication have allowed money to travel around the world faster than ever before, making it more attractive for businesses to expand operations and serve multiple jurisdictions.

Consequently, with a truly global marketplace comes the flow of ‘dirty money’.

In the EU alone, it is estimated that between two to five percent of global GDP is laundered each year – totalling between €715 billion and €1.87 trillion, making the fight against money laundering a high priority.

Efforts are being made to clamp down on nefarious activities. For example, the European Commission recently published a list of 23 high-risk ‘third’ countries with weak anti-money laundering and terrorist financing regimes.

This list, which includes countries such as Afghanistan, Nigeria and Pakistan, aims to better protect the EU financial system and identify the flow of suspicious funds.

In order to do so, it will become compulsory for banks and other entities covered by EU AML regulation to double-down on due diligence efforts when it comes to financial operations involving customers or entities in these countries.

Although identifying these high-risk countries is a step in the right direction in the fight against money laundering, it is important to recognise that secure, global solutions are crucial in order to clamp down on unlawful transactions and the financing of terror.

Ensuring increased transparency throughout the financial system will help the EU to identify and mitigate suspicious transactions coming from high-risk ‘third’ countries.

In an effort to become more transparent and thorough in their approach, many organisations are now turning to new technologies to aid them in their due diligence processes.

The use of automated and agile solutions to ensure regulatory compliance is essential when dealing with high-risk ‘third’ countries, which often require more stringent AML and Know Your Customer checks.

Money laundering, the financing of terror and general criminal activity can’t be effectively mitigated until financial institutions ensure regulatory compliance is at the core of their operations.

It is imperative that a safe system of information sharing is developed for organisations and financial institutions to be able to securely access databases to flag potentially high-risk individuals and businesses.

Only when financial institutions begin to adopt a global approach to the sharing of information will the flow of ‘dirty money’ coming in and out of the EU, particularly from high-risk third countries, be minimised.