The sixth anti-money laundering directive (6AMLD) is almost here. It has been n effect in EU member states since December 3, 2020, all financial institutions must implement the directive by June 3, 2021.
While there are fewer big changes than previous directives, 6AMLD brings clarity to specific regulatory details to close loopholes, toughen penalties, and encourage greater cooperation. Its goal is to empower financial institutions and states to do more in the fight against money laundering and the financing of terrorism.
UK financial services businesses
The UK has chosen to opt-out of abiding by further AML policy as the Government believes that domestic legislation is already mostly compliant with the Directive’s steps and, in most cases, goes even more than what 6AMLD proposes. For example, in the UK, the maximum penalty for money laundering is fourteen years, going beyond the new four-year minimum needed by 6AMLD; and aiding and abetting offenses of helping, motivating, and trying to launder money is currently a criminal matter.
However, it is essential to keep in mind that UK-based businesses in the monetary sector that operate within the EU jurisdiction will require to comply with the modifications set out in 6AMLD.
Access to clean and available international customer data for effective AML/ KYC screening
To be ready for 6AMLD, those in financial services require to know their clients, whoever they are. The key is to have access to billions of consumer records worldwide from trusted data streams; these consist of federal government firms, credit firms, and energy records for cross-check and verification purposes. It is particularly essential to obtain confirmation of important proof of address. Having access to up-to-date watch lists, such as politically exposed Persons (PEPs) information as part of this dataset is likewise essential.
From a customer experience perspective, the checks leveraging this data should take place in real time to prevent slowing the consumer onboarding procedure. This data should also originate from a single source to avoid the requirement for many expensive providers in various markets. This issue frequently results in irregular ID data and supply chain management issues.
Regtech: MRZ and ORC ID document scanning and biometrics to support 6AMLD compliance
When it pertains to remote onboarding, banks need to use machine legible zone (MRZ) and optical character recognition (OCR) innovations to gather customer ID and extract important details. This ensures the ID is real and validated in real time. The image ID embedded in these scanned documents supports biometric ID confirmation, such as facial acknowledgment, which can likewise help securely speed up consumer engagements.
Nevertheless, the biometric innovation must provide liveness checks, such as eye motion, for proof of life confirmation. This is vital with scammers significantly utilizing creative approaches like 2D images and video playback to try to trick facial recognition technology and ‘prove’ they are the person they are impersonating. In fact, this process can result in money services (MSPs) and Payment Service Providers (PSP) organisations getting a due diligence report related to AML and KYC that can be used to show their compliance when it comes to regulatory checks.
To prevent money being laundered and prevent extreme sanctions, financial services companies operating within the EU needs to comprehend and be ready for 6AMLD by the June due date. Ideally, this must involve having access to billions of consumer records worldwide for cross-check and ID confirmation functions, helping recognize individuals throughout borders. They must also undertake document scanning with MRZ and ORC innovation, which will also allow delivery of biometrics that help to safely speed up engagement with customers. Embracing these procedures will decrease the concern of compliance and equip financial institutions for more stringent global policies in the future.
How we can help
At LS Consultancy, our consultants are industry experts that interpret the rules, regulations and spirit of the industry guidelines by assisting you “the client” in implementing a compliance programme that you can be confident is mitigating the risk of financial crime. What we can do:
- We analyse the relevant jurisdictions legislation, regulation and industry guidance to ensure that your controls adopt the highest standard possible
- Analyse and/ or Enhance your Business Wide Risk Assessment to ensure we consider money laundering and relevant predicate crimes
- Assessment of your Customer Onboarding and/ or Periodic KYC reviews rely on independent documentation and supported by credible information from your customer – as this is key to your compliance programme.
- Robust Transaction Monitoring and Screening whilst utilising your up-to-date KYC documentation/ information are fundamental.
- Greater emphasis on training – why not go through live examples with your RM’s, Operational Teams and Compliance – discuss the areas of concern and come up with compliant solutions.
- Ensuring your Compliance Monitoring Programme is conducted on a regular basis
- Engagement with senior management through relevant committees
For further information please contact us where our industry experts will be happy to answer your questions.
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