What Is AML Data?

It includes people and organizations reported in Global and Local Sanctions &Terrorists Lists, Criminal & Law Enforcement Repositories, Regulatory bodies, Politically Exposed People, and entities involved in High-Risk Businesses. Adverse Media Data collected from global News Sources for financial crime acts as a good supplement. This data is often enriched with information from open sources such as wikis and refined using data sanitization and augmentation techniques using AI/ML. New age data providers have come up with the concept of Smart Data, i.e., data that is relevant, updated timely, well-structured, deduplicated, and enriched through a continuous AI and human feedback loop.

How to Access AML Data

The best way to access AML data is through a reliable data provider. You can subscribe to an AML Screening system that is built on top of a good AML database or go for just the data and integrate that into your existing screening workflow. Data can be accessed in various ways such as a file extract as CSV, Excel, JSON, etc., or through API. You can retrieve a complete dump of the data archive or just the delta i.e., only the data that has changed from the last time you updated your data repository.  Settle for a provider who not only provides comprehensive local and global data coverage but also updates them in a timely manner.

How To Leverage AML Data     

Once you have access to accurate and up-to-date AML data, you can create more effective compliance programs within your institution by leveraging this information in several ways. For example, you can use the data to detect suspicious activity in accounts by searching for known offenders or unusual patterns in transaction history. You can also use it to develop targeted risk assessments based on specific criteria such as geographical location or account type. Finally, you can leverage the data for better customer due diligence practices by verifying customer identity information against source databases before opening new accounts or processing transactions.

What Makes Accurate and Transparent AML Data Important?

Accurate and transparent data is essential for organizations to be able to effectively monitor activity that could indicate money laundering or fraud. Having access to reliable customer information helps organizations identify potential risks as well as quickly respond to suspicious financial activities. Furthermore, accurate and transparent records help ensure compliance with current laws and regulations. Without such records, organizations may find themselves at risk of being fined or shut down due to noncompliance.

How is Accurate and Transparent AML Data Collected?

Accurate and transparent AML data is collected through a variety of sources including customer identification processes (KYC), transaction monitoring systems, suspicious activity reports (SARs), internal databases, external databases, third-party data providers, public records searches, etc. Organizations must use all available resources to ensure they have the most up-to-date information on customers’ identity information as well as any activities which could indicate money laundering or fraud.

Conclusion:

As governments around the world continue to crack down on money laundering activities, financial institutions must stay ahead of the curve by utilizing reliable sources of Anti-money laundering (AML) data for their compliance efforts. By understanding what AML data is and how best to access it and leverage it effectively, financial institutions will be better equipped to detect potential money laundering activity and protect themselves from reputational damage associated with non-compliance issues. With these strategies in place, they will be well-positioned to remain compliant while staying competitive in today’s ever-changing regulatory environment.

For more than 30 years, the Financial Action Task Force (FATF) has been the global standard by which many countries have wholeheartedly adopted the measure to combat Money Laundering and Terrorist Financing(ML/TF). Since the FATF first started in the late 1980’s, many countries have come a long way in adopting FATF regulations and limiting the spread of ML/TF. While the primary G37 members have strict adherences and enforcement to the FATF 40 “Recommendations”, other members follow the guidelines with more leniency. When FATF was first founded,  there were only 7 pages of the 40 “Recommendations”. A mere 7 pages!  On the other hand, there are now a staggering 127 pages printed In the recently published June 2019 version of the “Recommendations”. Let that sink in.

Similarly, the original version only mentioned “policies” once, while in the latest version these policies are mentioned 30 times. This means that new “policies” were added almost 10 times per decade, resulting in about 42 new pages per decade.  This progression is not lost on most Compliance Officers, nor is it unexpected whenever regulations come into play.  So, when one may I ask, “Why is an AML Policy so important?” The answer to the question comes down to, its required by law!

Seriously though, WHY! Apart from the legal aspect there are many more important reasons why AML policy is becoming so crucial.  To be able to combat ML/TF risk, one needs to understand the risk which can come from all types of criminal individuals and organizations.  From the lone wolf to the entrepreneurial criminal enterprises, criminals launder trillions of dollars in drugs, human trafficking, bribery and the like according to a UN study in 2011. The FATF states “The possible social and political costs of money laundering, if left unchecked or dealt with ineffectively, are serious. Organized crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments.”

For some companies it can be complicated to build and maintain an AML Policy. AML regulations are constantly being updated as seen by the FATF example over a 30+ year period. In addition, some of these businesses operate in more than one jurisdiction, and often there is more than one regulator. If you think you have what it takes to build your own AML Policy, take our CAMLO quiz and see if you have what it takes.

If not, our team at KYC2020 has set out to create a tool to help with the development and support of an AML policy.  It was built with templating in mind to have a base to start with and then customize for each entities specific lines of business.  The first version was focused on FINRA regulated entities in the US.  Now we have two more in production for Money Service Businesses (MSB) and Dealers in Virtual Currencies (DIVC) in Canada and the US. The AML Policy template mechanism is structured to allow for flexible sections and content to be tailored to the specific activities of the Regulated Entities (REs).

Once a template is chosen, the RE works through the various sections answering the questions related to the particular component of a standard AML Policy, while customizing the components and sections specifically related to their business.  Once done, the RE can request to have a certified CAMS (or equivalent) person review it and provide additional feedback or suggestions on updates and changes.

When the RE is satisfied with the results, the AML Policy can be frozen, and version control kicks in.

As with FATF and their 40+ recommendations, it is the same idea with the RE’s AML Policy.  It will be a living breathing document that expands and changes over time.   The constant transformation of the document is a good thing, it demonstrates that the REs AML regime is maturing over time to deal with new risk, regulations, and changes to the business to fight ML/TF.

Want to find out more about our AML Policy tool?  Click here and sign up for this and all the other offerings at KYC2020.

Why You Need a CAMLO

Many countries around the world have adopted the Financial Action Task Force (FATF) recommendations which requires a CAMLO be designated. For example, in implementing the Bank Secrecy Act (BSA), the United States government appointed various regulators and oversight groups like FinCen, FINRA, and the SEC. These groups ensure that identified entities, including most FinTech, comply with all AML regulations. FINRA is an example of a Self-Regulatory Organization (SRO) that ensures all dealer-brokers implement an Anti-Money Laundering Compliance Program. This program requires that the AML Compliance Officer (ie. CAMLO) oversee the program and provide a point of contact between the organization and FINRA. Other requirements of an AML Compliance Program under FINRA Rule 3310 include:

• Written approval of the program by senior management
• Reasonable assurance of detection and reporting any suspicious activity
• Achieve reasonable compliance with all AML regulations with a risk based customer identification program
• Provide regular independent testing
• Continuous training for all relevant employees and customers

So, to achieve full compliance your organization is required to designate one of the members of your organization as your CAMLO.

The Roles and Responsibilities of a CAMLO

Essentially, your CAMLO is responsible for ensuring your Fintech startup efficiently complies with all AML regulations. This takes the form of managing risks, advising on business strategies, training relevant employees, staying up to date on changing regulations, and finding cost saving methods to achieve compliance.

Your CAMLO helps your organization determine your acceptable level of risk when it comes to complying with AML regulations. Once your risk levels are determined, they create an AML Compliance Program according to your acceptable risk. While an effective compliance program is required, what constitutes “effective” is left up to interpretation leaving room to match the program to your organization.

A CAMLO also advises on your business strategies to ensure your methods of growth still allows for AML compliance. Taking their recommendations and utilizing them keeps your risks of violating any regulations to a minimum. This also ties into training relevant employees. Keeping those in charge of business strategy up to date on how your organization maintains AML compliance enables them to make better decisions on how to grow your business.

The complexity of AML regulations cannot be understated. As they constantly shift to keep up with new technologies and demands, your CAMLO must understand how they continue to evolve. Some of these shifting rules could lead to ways you can save on your compliance costs. Your CAMLO can identify these regulations and alter your AML Compliance Program accordingly.

Legal & Financial Accountability

Prior to designating yourself or one of the members of your organization as a CAMLO, they need to understand the risks they are taking. If your startup is found to be in violation of AML regulations whomever you designate as your CAMLO can be held personally responsible. For example, MoneyGram’s AML Compliance Officer paid a $250,000 penalty for failing to comply with regulations in New York State. These violations included failure to terminate their relationship with fraudulent organizations and failure to implement organizational policies to terminate relationships with high risk organizations.

In just February of 2018 two other cases like this penalized the compliance officer of the US Bank and Rabobank. The liability of a CAMLO significantly changed after Wells Fargo’s officer was found in violation in November of 2017. Prior to this case, most violations were directed at the organization instead of the individual. This new wave of charging individuals instead of organizations alleviates some responsibility. However, it makes it more difficult for Fintech startups to designate themselves as their organization’s CAMLO without taking on unnecessary risks. So, if you are considering designating yourself as your startup’s CAMLO, you must be sure you fully understand how to achieve full compliance to minimize your personal risk. You may wish to consider ensuring your E&O insurance covers this type of risk.

Alternative Options to Ensure Compliance and Minimize Risk

There are several cost-effective options to ensure full compliance with AML regulations and avoid taking unnecessary risks. These options can include:

• Employing a part-time expert and designating them as your CAMLO
• Hiring a consultant to review and advise you on maintaining your compliance program
• Create a culture of training and learning to ensure your entire organization helps maintain AML compliance

Employing a part-time expert provides a simple way to avoid personal risks of violating AML regulations. They will most likely request that your E&O cover them in any lapses your organization has failed to implement. They can fully understand your organization and goals to create programs that ensure compliance. While this is likely the most expensive method of designating a CAMLO, it minimizes your personal and organizational risks.

Hiring a consultant does not provide you with a CAMLO, however it does minimize the risks associated with designating yourself as your organization’s compliance officer. They can create your compliance program and advise you on how to implement the program. The consultant can also train your employees on keeping your startup fully compliant. Keeping this culture of training and learning helps your employees stay up to date on changing regulations long after the consultant has finished their work.  Here are 5 Key Aspects to Finding the Right CAMLO when you to to hire a consultant.

Conclusion

While becoming the Chief AML Compliance Officer for your fintech startup is possible, it requires extensive work, preparation, and ongoing maintenance to keep yourself qualified and your firm from being fined for a violation. KYC2020 offers a quiz to help you assess your basic knowledge of AML compliance regulations by your business type. Take the quiz and find out whether you should even consider putting on the CAMLO hat and take on the additional liability.

KYC2020 also supports a network of certified independent AML specialists that can advise you on effective options to maintain compliance. They look into your organization and how you operate to provide cost-effective plans your organization can follow. At first glance AML compliance may seem like a burden to getting your fintech startup off the ground, however it does not have to be complicated or costly with the help of KYC2020.

Spreadsheets for Everything

While an RA is the foundation for a good risk-based AML Regime, it is often marginalized by many non-bank financial firms.  It is done in a superficial manner, using tools that are convenient and free, but ill-suited for the job. Spreadsheets are generally the tool of choice to input, track, and manage the annual risk assessment compliance requirement. As one can imagine, this approach is rather ineffective. It lacks proper controls, is prone to human-errors, difficult to audit, share, or track revision history. Moreover, as banks enhance their KYC regimes, they require annually updated formal AML Risk Assessment documentation.  The inherent limitations of spreadsheets for RA reporting and management is obvious.

Alternatives to Spreadsheets

So then, what are the alternatives to spreadsheets? The challenge once again for most SMEs and FinTech innovators is Cost, Availability, Competence, and Convenience. In our search for alternatives, we could not find a competent RA tool that met our basic requirements, was available at low-cost, was easy to get started, and convenient to use.

When we introduced our FREE Watchlist Curator Tool, we made the following statement:

“At KYC2020, we could have invested in writing a blog and talked about why “over-screening” is an expensive problem…  Instead, we decided to have our CAMS AML specialists build a tool to help you identify what Sanction, PEP, and watchlists you should be screening based on your company’s risk profile. And we decided to make our watchlist builder available free of charge.”

KYC2020 Free AML Risk Assessment Tool

For our AML Risk Assessment Tool, we decided not to be so lazy. We not only built a tool that we could make available for FREE, but also forced our CAMLO, Joseph Iuso, CAMS, to write a Blog on the What, Why, and How’s of an AML Risk Assessment. Between the information and wisdom of Joseph’s blog and the competence and convenience of our RA tool, I believe we have got you covered. Of course, we have the standard disclaimers, and you should already know that a tool cannot replace the advice of your in-house Compliance Officer.

Get started by clicking below.

KYC2020 AML Risk Assessment Tool benefits heavily from the Federal Financial Institutions Examination Council’s (FFIEC) Risk Assessment guidelines, as well as the Conference of State Bank Supervisors (CSBS) BSA/AML Self Assessment tool.  The tool considers five (5) main categories to arrive at an aggregate risk score for your business. These are: 1) Products and Services, 2) Customers, 3) Geography, 4) Operations, and 5) Agents. For each category, you have the opportunity to specify the High, Medium, and Low Risk definitions inherent to the business. For the inherent risk definitions you then specify your controls and mitigation measures to arrive at the residual risk; the risk that still remains after application of your counter-measures. This residual risk is then scored and aggregated across all categories to complete your risk assessment.

Who said it would be Easy

Sounds complicated? That’s because it is. Even for AML specialists working on a low-risk profile business, this is a minimum 2+ hour investment of time. It is for this reason the tool has the ability to save work and complete the assessment over multiple sessions. With a little bit of study, watching our Get Started Video, and rolling up your sleeves you can get through with your risk assessment on your own and for FREE!

Need Help with your RA?

For those who need a little bit of help completing, we offer some reasonably priced paid options to speed up your risk assessment process and follow best practices. These include, access to business specific templates that can be customized to speed up the assessment, different consulting packages to help prepare, review, and/or audit your Risk Assessment by our CAMS or VSKILLS certified AML specialist.

Once again, there is no catch. The tool is no obligation and we do not take any payment information. We do hope you might take the time to see what awesome and affordable AML compliance solutions we offer, from Global Watchlist Data to Sanction Screening to AML compliance consulting services. Chat with us online now, email us, or just use the tool. Our aim is to help you reduce the cost and friction of AML compliance.

When an auditor flags a MSB or FinTech for not doing enough to fight AML/CTF crime, the impulse response is to ‘Select All’ and screen every list available to them indiscriminately. In other words, they go from screening just one list (most likely OFAC) to “over-screening.”

At KYC2020, we could have invested in writing a blog and talked about why “over-screening” is an expensive problem. We could have dug into how over-screening results in excessive false positives. Into how these false-positives require manual effort to clear and cause unnecessary cost and friction that slows down customer onboarding. And we could have told you how our paid services could help.

Instead, we decided to have our CAMS AML specialists build a tool to help you identify what Sanction, PEP, and Watchlists you should be screening based on your company’s risk profile. And we decided to make our watchlist builder available free of charge. Of course, we have the standard disclaimers, and you should already know that a tool cannot replace the advice of your Compliance Officer.

The tool gives you an effortless way to check to see what sanction and PEP lists we think you should be screening and whether you are doing enough, or too much based on your AML Risk Profile. 

It’s a 5 minute investment of your time.  Get started by clicking below.

So what’s the catch?  Nothing! The tool is no obligation and we do not take any payment information. We do hope you might take the time to see what awesome and affordable AML compliance solutions we offer, from Global Watchlist Data to Sanction Screening to AML compliance consulting services. Chat with us online now, email us, or just use the tool. Our aim is to put an end to over-screening and reduce the cost and friction of AML compliance.

And oh by the way, if you want to learn more about ‘Over-Screening’ and other AML compliance challenges faced by Non-Bank Financial Firms and FinTech Payments Innovators, read our Whitepaper.  It’s long and possibly dry, but it may help you save some money, reduce compliance friction, and improve the customer experience.

The Problem

When I was asked by my newly hired social media and marketing associate to start a blog and share my insights and ‘thought leadership’ on the topic of AML Compliance and how costly high-friction systems designed for banks over 20-30 years ago are killing financial innovators and FinTech, my natural response was, No thank you. I don’t want to be just ‘another bloke with a Blog.’ But there was a problem, KYC2020 was ranking poorly in Google searches and something needed to be done. And content marketing, I am told, is a good place to start.

“To be or Not to Be,” That is Not the Question.

Social Media Marketing is something I have actively rejected for too long and for too many reasons, both rational and irrational. But conscientious objection is no longer an option.

Now as I sit here listening to Pink Floyd, I am contemplating just exactly how I participate without having a ‘ghost’ do it for me.  So then… what do I want to be?

After all you already have,

“Thirteen channels of shit on the TV to choose from.” –The Wall.

Reconciling the Past

I suppose I should start with reconciling my long-held suspicion of social media platforms.

Did it have its beginning with engineering and Georgia Tech? Or was it at University of Chicago GSB?  No, I believe it is my 20 years in capital markets and FX trading where I institutionalized my contempt for “purpose-driven” social networking and influence peddling into a philosophy.

There is this famous Wall street saying for traders that goes, “Those who Know, don’t Say. Those who Say, Don’t Know.” Trading is a zero-sum game where the motivations for information sharing and social exchange are questioned without question. Thought inception is the greatest fear.

Lessons Learned

KYC2020 is a company of technologists that got started as often engineers foolishly start– to solve a problem. Sales is usually the afterthought, especially when the means to fund new product development are available and founders are product people.

At KYC2020 the problem we wanted to solve was why sanction screening and AML compliance was so costly and cumbersome for FinTech and Money Service innovators. For three (3) years we focused on product development and largely shunned sales and marketing. It was costly, and we did not have the in-house talent. It was a distraction from our primary goal—to create next-generation RegTech services.

With one of my first technology companies, TEKchand, we had a similar problem of limited resources in 2002 to accomplish both product development and marketing goals.  We solved the problem by partnering with managed services providers and went with a white-label distribution model. We avoided a dedicated sales and marketing function all together. The revenue give-up from a re-seller model was roughly equal to the cost of building out the sales/marketing function.

It turned out to be the right business strategy in a slow moving, highly protective industry where brand awareness and marketing only invited threats and unfair business practices from the old guard with considerable bargaining power. But it is certainly not the right strategy for RegTech and FinTech, two of the fastest growing areas in business that are doing so much social good.  Most notably, bring banking to the unbanked, micro-lending to the poorest parts of the world, low cost money remittance to migrant workers for families at home, and much more.  They are disrupting the disrupters, and social media is a powerful enabler.

Social exchange, experience sharing, and thought leadership help entrepreneurs identify and safely navigate the roadblocks and pitfalls that can slow down innovation. Possibly more importantly, social media platforms can be used to call out and start a dialogue on the unfair business practices and barriers to entry put in place by the entrenched players, practices that cause friction and prevent modernization.

I am thinking WAZE here. I wish I had been more vocal about our ATM software technology business.  ATM vendors should have been called out on their business practices.  But that’s a topic for another day.  What matters is that I’ve learned my lesson. With KYC2020, it’s my full intention to use my platform to its greatest effect. If we take WAZE as an example, the power for good with this exchange of social capital is immense. But that power isn’t always used by people with good intentions.

The Dark Side of the Moon

Though social media marketing can result in a great deal of good and innovation, there are many people that seek to abuse that power. Entire websites and social media accounts established for the singular purpose of amassing impressions, and foot traffic, and clicks. It doesn’t matter if the content shares new ideas. It’s about taking that social power and turning it into tangible capital, then leveraging it to sell something. With most people in the industry clamoring to amass that capital and sell their products, new insights can become the unfortunate casualty of the machine.

So then… what is YOUR motivation, Mr. Bahri? You might be asking.

I don’t know Ringo! let me borrow a line from Jules Verne, Pulp Fiction, “I’m trying.  I am trying real hard to be the Shepherd.”  And “If my answer frightens you, then you should cease asking scary questions.”

Goodbye Blue Skies.  I am leaving you Today.

My disdain of social media for business and marketing is a behavior entrenched in me for over 25 years. It’s difficult to unwind that thread. So, I figured start slowly. I’m fortunate to be in a position in life, as a founder, investor, and business owner to speak freely. And I know you are fortunate enough to already have plenty of thought leaders who can dissect the same topic, offer the same perspective, and sell you a roadmap to success.

I want to be different. To speak from failures, be controversial, and question why we are on the road instead of trying to sell you the roadmap. To question the problem instead of trying to sell the solution. But I am not here without a purpose, I too have a product that I believe in, and the urge to sell is strong. But I will keep my motivations in check.

With all that in mind, I am going to start with cartoons.  At least with a cartoon, it’s not a blog! You may not understand what i am saying, like or agree with it. You may question my motive, intelligence, or insight, but at least I won’t be wasting much of your time.

But if the thought does resonate, it can start a dialogue, and it won’t be Just Another Blog on The Wall.