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The fight against Anti-Money Laundering should be a priority for the future of all banks
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Global Banking & Finance Review®
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By Gabriel Viera, Chief Compliance Officer at Zenus Bank
Across the financial services and banking sectors, we are witnessing increasing demand from customers, businesses, and governments to prioritize compliance and risk management.
The geopolitical tension following Russia’s invasion of Ukraine — and the subsequent exposure of financial links between the Kremlin and organizations in Western democracies — has accelerated pressure on governments to make a more concerted effort to investigate unexplained wealth orders, provide stronger reporting measures to tackle illicit transactions, and ensure provisions are taken on sanctions to guarantee that the bank accounts of ordinary citizens remain secure.
Compliance leaders are now looking at financial crime as a legitimate risk, not just a “check the box” compliance activity to appeal to auditors or regulators, but one of the leading requirements for all banks. As the industry moves in this direction, the entire ecosystem — law enforcement, regulators, and financial institutions — must adapt and innovate quickly. Indeed, regulators are now acknowledging that increased sophistication and innovative technologies will be the main drivers in moving the needle on true financial risk management. As a result, investment is being propelled into providing more sophisticated solutions in the Anti Money Laundering (AML) and anti-financial crime industry.
However, there is clearly much more progress needed to accomplish the openness, reliability and safety needed to ensure customers’ assets remain secure. Some organizations — those that have led the banking sector for decades — are still relatively basic in their processes like Know Your Customer [KYC], AML, and alert reviews, with many false positives, missed transactions of concerns, and significant time, resources, and costs spent on ineffective low-risk–reducing activities. There is a need for progression and the desire to innovate quickly and effectively, with a focus on implementing high-risk–reducing activities that can provide AML alerts in real-time across both traditional finance as well as the growing presence of digital assets.
This is the challenge of the next decade and will only become increasingly hard to address — regulating increasingly complex digital financial assets alongside the continued acceleration of globalization, international finance, and seamless cross-border transactions. The rise of embedded finance — offering instant payment services from one bank to non-financial institutions, ranging from supermarkets to the retail sector to business providers — means monitoring the legality of each instant transactions is more important than ever, especially when coupled with significantly changing business models. The advent of digital banks and remote working means financial transactions — both internally within the company and externally between different business and personal accounts — operate across boarders every second of the day.
For banks like Zenus, who offer a US bank account that allows clients in over 150 countries to deposit, hold and make payments through US banking infrastructure, the need for secure AML services for individuals and companies worldwide is imperative. Equally, it needs to be designed to operate at scale without compromise.
Adopting systems such as the Customer Identification Program (CIP) has been key to achieving this. This technology streamlines the onboarding process for all our new customers using facial and voice recognition combined with artificial intelligence, all but eliminating the risk of individuals or businesses setting up fake accounts. CIP also validates thousands of identification documents in seconds, comparing the customer’s ID when submitting transactions to their facial recognition to provide financial security for us and our customers against money laundering. This type of full cycle integration of customer biometric validation and frictionless connectivity with multiple vendors is essential for financial irregularities and fraud prevention, as is eliminating old protection systems, such as the need for passwords, personal questions, or other weak links in the security chain.
These systems will help define the safety of the global banking sector and will be essential in helping ensure financial systems can operate securely and provide stability, especially in emerging economies. A report by PwC highlighted that Brazil, Indonesia, Mexico, and Turkey will develop banking sectors of comparable scale to major European economies such as the UK, France, and Italy before 2040. Meanwhile, EY’s report in 2019 showed that financial inclusion can help boost GDP by up to 14 % in large developing economies such as India and up to 30% in frontier markets across Africa and South America. Such a demand requires frictionless financial activity, thereby ensuring businesses have constant access to capital to invest, stability in the knowledge they can operate with established banking providers and the security that their money is protected and loaned from banks with industry-leading AML services.
All these properties are essential in creating a new, stable future for the global banking industry, one that starts with banks providing a secure future through investment in innovative AML services.
Anti-money laundering (AML) refers to laws and regulations designed to prevent the practice of generating income through illegal actions. It involves monitoring financial transactions to detect and report suspicious activities.
Risk management is the process of identifying, assessing, and controlling threats to an organization's capital and earnings. It involves analyzing potential risks and implementing strategies to mitigate them.
Compliance in banking refers to the adherence to laws, regulations, and guidelines set by governing bodies to ensure that financial institutions operate within legal frameworks and maintain ethical standards.
The Know Your Customer (KYC) process involves verifying the identity of clients to prevent fraud, money laundering, and terrorist financing. It requires banks to collect and maintain customer information.
Financial crimes are illegal acts that involve deceit or theft for financial gain. This includes fraud, money laundering, embezzlement, and other activities that violate financial regulations.
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