Financial Crime Risk Management - Taking Action to Support Anti-Money Laundering


In my first article, I looked at the main areas covered by the 4th Anti-Money Laundering (AML) Directive from the EU. This post covers the amendments to that directive introduced by the 5th AML Directive, and suggests how organizations can address the requirements of the two directives.

The 5th AML Directive: bringing Anti-Money Laundering regulation fully up-to-date

anti-money launderingOn 5 July 2016 the European Commission in order to further reinforce EU rules on anti-money laundering to counter terrorist financing and tax avoidance suggested a new proposal for a Directive amending the 4th AML Directive. According to the European Commission the amendments to the 4th AML Directive (also known as 5ht AML Directive) target the following areas.

Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation: FIUs will have the ability to request information on money laundering and terrorist financing from any obliged entity. The EU Member States should have to set up centralized registries of the identities of holders of bank and payment accounts.

Undertaking terrorist financing risks linked to virtual currencies: The virtual currency exchange platforms and the wallet providers are from now on under the scope of the Anti-Money Laundering Directive, as obliged entities. That means that these entities will need to apply Customer Due Diligence measures when switching virtual for real currencies.

Undertaking risks linked to anonymous pre-paid instruments: The Commission proposes to set lower maximum transaction limits (from € 250 to € 150) for certain pre-paid instruments in order to minimize as much as possible the use of anonymous payments via these instruments.

Additional and much stronger checks on risk third countries: Under the specific amendment the5th AML directive Commission suggests the standardization of the EU approach (CDD measures) towards high-risk third countries.

Improve access to beneficial ownership registers: Under the specific requirement Member States will make public relevant information of the beneficial ownership registers on companies. The beneficial owners who have 10% ownership in certain companies that present a risk (i.e. tax avoidance or Money Laundering) will be included in the registries.

Extending the information available to authorities: The Commission has suggested under this amendment that existing, as well as new, accounts should be subject to due diligence controls. The type of companies and trusts, such as those highlighted in the Panama Papers, will also be subject to greater examination and tighter rules.

What should you do?

Due to the growing regulatory emphasis on combating money laundering and terrorist financing, there will be an increased requirement on regulated organizations. These organizations should ensure that they are prepared for these changes, and have the technology infrastructure, processes and controls in place in order to meet the strict regulatory deadlines.

In particular, I would recommend organisations develop a robust Anti-Money Laundering framework based on European regulatory requirements. This will include providing industry-specific data models for an essential, enterprise wide view of customer and account activity across disparate data sources. Typically, it involves deploying an Anti-Money Laundering Due Diligence methodology and conducting Watch-List filtering to identify matches of customers who appear on government sanctions lists. Compliance practitioners will also need to consider compliance analytics to improve true positive rates, and reduce the false positive ones, as well as reducing staffing requirements.

If you are interested in learning more on the increasing importance of Financial Crimes Intelligence Units in Banking download the free Longitude Research Paper “Combating Financial Crime.

Analytics to Combat Financial Crimes

Join us on Thursday 7th September at 14hrs CET, 13hrs UKI, 8hrs EST to explore #AML considerations. Use the hashtag #saschat when replying to the following questions:

Q1:  What do financial crimes cover?

Q2: What are the main risks for financial organizations?

Q3: How should efforts be prioritized between compliance and financial crime prevention?

Q4: What have you seen as critical components of successful Financial Crime Risk reviews?

Q5: How is analytics reducing the cost of financial crime prevention and/or compliance?


About Author

Spyros Maltezos

Business Solutions Manager - Risk Practice, SEMEA

Spyros is the Business Solutions Manager-Risk Practice, for the office of SAS in Southern Europe, Middle East & Africa (SEMEA). By combining his 8 years of Risk Management experience with SAS Risk & Compliance Solutions he provides consulting services to financial institutions on matters ranging from governance, to risk and regulation. Previously he held Credit Risk Analyst position at one of the major Greek financial institutions, participating in key components of Credit Risk Management, including development and implementation of Credit Rating Systems using complex statistical packages.

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