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Piet Craenen (Refinitiv): Helping to clean up AML compliance

Refinitiv Risk Hub | Access Local Content 

Piet Craenen, Proposition Sales Specialist Benelux at Refinitiv, explains the challenges financial institutions face with the implementation of 5th AML Directive and the increasing use of digital identification in the payment sector.


How has the 5th AML Directive impacted your clients’ businesses ?


The implementation of the 5th AMLD Directive in January 2020 has had an important impact on a range of financial services provider, from traditional financial institutions, through to sectors such as crypto-asset exchanges, real estate and prepaid card businesses. Many have come to rely on a combination of data and technology to help meet their obligations and avoid falling foul of the new regulations. One of the main challenges from the directive is the increased requirement to identify the beneficial ownership of funds or assets through an open and available Ultimate Beneficial Ownership register. However, few countries have such a register in place. That means many organisations still rely on proprietary identification processes and must inform central registers of any discrepancies between their documentation and the register. The second challenge is to identify suspicious transactions and report them to local authorities. There is an opportunity to address both of these challenges more efficiently by investing in more automated processes. They require access to better data and technology or reliance on managed service providers that allow them to identify beneficial ownership and manage transactions compliance.

“Digital identification technology can make banking safer and reduce the risk of money laundering and terrorist financing.”

Will digital identification technology help monitoring for suspicious activity to be more efficient?


The digital payment sector is growing at nearly 13% a year and there is a growing reliance on technology to help streamline its adoption. 


Firstly, digital identification technology can make banking safer and reduce the risk of money-laundering and terrorist financing. Secondly, it supports more efficient customer due diligence. This was confirmed in guidance issued by FATF earlier this year, when it stated that not all non-face-to-face transactions pose a higher risk - provided the digital identification technology is robust. This requires two factors in the CDD process: identity proofing; confirming who a person is, and authentication; for example using biometrics to prove the uniqueness of that person’s identity. One feature of the new regulations is the demand for technology to help identify multiple individuals, often in different jurisdictions, and in organizations ranging from those offering traditional banking solutions to crypto exchange providers. Meeting that demand requires digital identification technology to be not only effective and efficient, but also to respect local regulations.


What are the challenges of ensuring compliance in this complex landscape?


Sanctions represent a major risk of financial and reputational damage for regulated and non-regulated entities. The combination of data and technology is key to protecting organizations against the risk of breaches of AML regulations. Sanctions compliance is and always will be one of the priorities of the financial services sector. As a financial data and risk solutions provider, we use our information and technology to identify any sanctioned securities within investment portfolios. This remains a complex activity as it is necessary to identify both direct and indirect ownership of companies and link this to the issued debt or equity. We have seen significant interest from the market to screen investment portfolios and identify direct or indirect links to lapses in AML compliance. As a company, we are committed to helping customers tackle their regulatory and compliance challenges. Through continuously monitoring the two types of ownership and identifying investments requiring action or that are linked to a suspicious entity. By combining data and technology, it is possible to create a robust compliance programme and ultimately help fight financial crime.

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