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What can US banks learn from the EU about money laundering?

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What can US banks learn from the EU about money laundering?

Karim Rajwani, Global AML Advisor, Quantexa

Money laundering is, by nature, an international problem. In most cases, the process involves moving the profits of crime around the globe in order to obfuscate the trail behind it and, therefore, turn it into ostensibly legitimate assets.

But, Anti-Money Laundering (AML) legislation is not consistent on an international scale. Over the past several years, the European Commission has taken several steps in an attempt to curb its growing money-laundering issue. Its latest development, known as the EU’S 5th Money Laundering Directive, introduces a range of new requirements that ought to be considered by US banks too.

One of the primary focuses of the EU’s 5th Money Laundering Directive is to encourage cooperation on an international level between its member states and their leading financial institutions. One way this is being encouraged is the creation of a centralised and public Ultimate Beneficial Owner (UBO) list. Essentially, this is a list of all the owners and beneficiaries of each company that the bank is involved with. The EU’s previous money laundering directive had required that each institution had its own UBO list, but these new regulations require that these lists are publicly available.

UBO lists reduce the ability of criminals to hide their identity behind corporate structures. Historically, someone looking to legitimise a sum of money could start a company that would act as a front for an illegal organisation so that, on paper, the money appeared to be coming from lawful business practices. The introduction of required UBO lists has reduced this by obliging institutions to look further into the people behind each company.

Although the introduction of UBO lists has been successful, there are still ways that criminals have been able to work around it, by moving their money through countries and institutions where UBO background checks might be less likely to find them. The introduction of mandatory information sharing between nations and institutions will help to limit this. With a centralised register of UBO, it will be easier for any organisation to link potentially illicit businesses together via the same identified UBO. This is something that US banks must be looking to replicate.. At a national level, US states would benefit from the introduction of centralised UBO lists that compiles information from each federal government. Otherwise, the money that is being moved by money launderers is only moved in different patterns, through different states, rather than prevented altogether.

The EU’s 5th Money-Laundering Directive also calls for centralised and publicly accessible registers of Politically Exposed Persons (PEP Lists.) A PEP list is a list of positions (not actually the people themselves) who are politically exposed and therefore of greater significance in investigations regarding corruption. A cross-national PEP list is extremely valuable, because it will show connections between countries that might not have been visible beforehand. For example, two PEPs could be listed on their countries own lists and cleared of any illicit activity on a domestic scale, but a connection between them on an international scale, only made clear by a cross-national list, could expose an international involvement in money-laundering.

The concept of a PEP is not unfamiliar in the US – positions of similar significance are usually described as Senior Foreign Political Figures – but the entire process would become more effective if there was cooperation between governments and institutions in the USA and the EU. As processes for preventing money laundering continue to improve, the flow of illicit funds moves to places where it is less likely to be detected. International collaboration and the wider enforcement of AML policy that encourages means the options available to launderers will continue to narrow.

The EU has made sizeable headway with its money laundering problem. Perhaps due to the fact that Europe has itself been the place where the biggest and most shocking cases of laundering have occurred. Nevertheless, the European Commission’s commitment to eradicating the EU of such activity has been clearly evidenced by its latest AML directive. The USA must heed warning from the EU that international collaboration is the only way that nations will be able to tackle the problem properly, without just circumventing the flow of illicit funds away from its own domestic accounts. The creation of a global, public lists of Ultimate Beneficial Owners, and of all Politically Exposed Persons would have a profound impact on the efficacy with which criminal organisations are able to operate. As long as there are discrepancies in national policies, there will always be places for the profit of crimes to flow, and cooperation by the world’s leading nations is the only way to stop this from happening.

Banking

New digital first bank – Monument – announces its key technology providers

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New digital first bank - Monument - announces its key technology providers 1
  • Monument selects Mambu, Salesforce, Amazon Web Services, Persistent Systems and Accenture as key providers for its technology build
  • Monument is the first challenger bank in the UK to service the unmet demands of more than 3.5 million mass affluent clients: professionals, property investors and entrepreneurs
  • It is building a modern, unique, lego-like technology platform which takes best of breed SaaS providers and integrates them in a cloud based microservices architecture

  • This will deliver an exceptional client experience and enable Monument to innovate and to introduce new components on a frequent basis
  • Monument today announces that Mambu will be the central core banking engine in the platform alongside Salesforce for CRM, and AWS for cloud services
  • Monument has also engaged Persistent Systems and Accenture Interactive to support the platform build

Following receipt of its banking licence with restriction on 6 October 2020, Monument has now signed agreements with a number of key technology providers to enable the build of its bespoke technology platform.

Monument wants to deliver exceptional client experiences by using technology solutions that are modern, flexible, easy to integrate and ultimately, if necessary, able to be replaced should the need arise. The design of its lego-like technology platform is Monument’s solution to the huge challenges faced by the legacy systems of established banks. Having assessed the market over many months, Monument concluded that no appropriate single solution existed in the market for the products and services that Monument will launch in 2021.

In addition, Monument only wishes to develop its own technology where it can deliver significant competitive advantage, for example in the mobile and web services to be used by clients. Much of   the technology platform is therefore based on best of breed solutions from modern, cloud-based providers.

Mambu has developed the leading cloud banking engine which is an excellent fit for the platform that Monument is building.  Similarly, Salesforce provides an industry leading CRM (customer relationship management) solution which can easily be integrated with Mambu and other solutions. AWS, as a leading provider of cloud-based infrastructure, provides a range of components to ensure the platform is reliable, scalable, secure and flexible.

To support Monument in building and integrating a platform with more than 18 different components/providers, Monument has chosen to work with Persistent Systems, a leading global solutions provider specializing in digital with extensive experience in software as a service (SaaS) solutions. To support Monument in rapidly building its mobile app and web-based channels, Monument has chosen to work with Accenture Interactive, which has significant expertise in building innovative digital experiences in both the financial and non-financial sectors.

Steve Britain, Monument’s Chief Operating Officer said:

“We have been working closely with our chosen providers for some months now, to lay the foundations for the build of our platform. We are delighted at how much we have already achieved, particularly as much of the work has been done by a highly distributed team because of COVID-19.  We are now focused on completing the work to build a unique configuration of best in class software components that will make us highly flexible for the future and deliver market leading client service.”

More announcements will be made shortly as other key components of the architecture are confirmed.

Sudip Dasgupta, Monument’s Chief Technology Officer added:

“It was essential to me that we selected the strongest providers available. Those that offer us modern technology solutions with the best degree of integration that we need, together with flexibility for the future and proven operational reliability. In Mambu, Salesforce and AWS we have certainly achieved that objective and we are excited about our future engagement with them. Equally, as we rapidly build our platform for launching with clients in early 2021, we wanted support from providers  who have been on this journey before and in Persistent and Accenture Interactive, I am delighted to say we have found that.”

Monument will be the only bank to offer its clients an entirely digital journey for buy-to-let and property investment lending of up to £2million. It will offer market leading, top quartile savings rates and its model is designed to reward loyalty. So, if a saver deposits money for a subsequent fixed term, they will get a better rate than a new customer. And a borrower who renews their loan will also be offered a favourable rate.

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Banking

UKRSIBBANK, part of BNP Paribas Group, announces a strategic partnership with financial wellbeing startup Dreams, to enhance the digital user experience of its 2 million customers in Ukraine

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UKRSIBBANK, part of BNP Paribas Group, announces a strategic partnership with financial wellbeing startup Dreams, to enhance the digital user experience of its 2 million customers in Ukraine 2
  • The technology powering popular consumer app, Dreams – which has helped 460,000 users save over 440M EUR – will be made available to UKRSIBBANK’s users in Ukraine.
  • Through the integration of the Dreams platform within UKRSIBBANK’s own digital tools, customers of the bank can set and achieve money-saving goals, track and improve their financial lives.

Dreams (https://www.getdreams.com/en/b2b/), the Stockholm-born fintech empowering millennials to save and feel better about their money, today announces a strategic partnership with Ukrainian commercial bank UKRSIBBANK, a subsidiary of French international bank BNP Paribas Group.

This partnership follows the announcement earlier this year of Dreams’ first enterprise partnership with banking software provider Silverlake Symmetri, and the recent unveiling of a new department in Stockholm dedicated to the development of Dreams’ B2B partnerships. The announcement marks an expansion of the company’s business model as it consolidates its B2B offering and evolves its services as a provider of white label solutions for financial institutions.

Through the integration within UKRSIBBANK’s own digital tools of the Dreams Platform – which is rooted in scientific principles – customers can set and achieve money-saving goals through clever, automated saving features, in addition to nudges and saving hacks.

The Dreams Platform will be included as part of UKRSIBBANK’s digital banking offering for its 2 million+ customers, and is set to grant millions of potential consumers across Ukraine access to products which will help keep their finances on track and improve their financial lives.

The rise in digital self-help tools has long been anticipated by Dreams and forward-thinking financial institutions. The current global economic uncertainty brought about by the COVID-19 pandemic has also placed significant strains on people’s finances, and the demand for better personal finance tools has only accelerated. The partnership with Dreams is welcomed by UKRSIBBANK which is currently striving to equip its customers with the best possible banking solutions whilst helping them achieve a more sustainable lifestyle.

Dreams is firmly established as an authority in its industry, having launched its consumer-facing app in its native Sweden in 2016 and Norway in 2018 – where it has already achieved a 16% market share of all 20-39 year olds.

Henrik Rosvall, CEO and founder of Dreams, comments: “It’s a true honour to be partnering with UKRSIBBANK and BNP Paribas Group, and we’re incredibly excited to be introducing the Dreams solution to UKRSIBBANK’s customers and the wider Ukrainian market.

“Dreams and UKRSIBBANK can now lead the charge, with BNP Paribas Group’s corporate strategy having shifted in recent years to focus on guiding customers towards responsible consumption and sustainable personal finance management. I’m confident that our mission of helping millennials save more and feel better about their money makes us the ideal partners.

“Our financial wellbeing platform – which is built upon behavioural science and personal finance management principles – will provide the perfect tool for UKRSIBBANK to help its customers make better financial choices and become more sustainable in the way they handle their finances. This partnership will also help UKRSIBBANK safeguard the loyalty of its customers and futureproof its digital banking offering against a growing number of challenger banks and fintechs.”

Konstantin Lezhnin, Head of Retail at UKRSIBBANK BNP Paribas Group, comments: “I believe that banks have a role to improve their customers’ lives. Planning and saving for important life events improves our quality of life by reducing stress levels, and we wish to make our customers feel more confident and in-control of their lives.

“UKRSIBBANK has always applied innovative ways to assist our customers in financial planning, so we are very happy to now be working with Dreams, the best European player in behavioural savings. They have an extremely solid track record in Sweden and Norway based on scientific research, so we are confident that this partnership will work positively for our customers in Ukraine. This also demonstrates our strategy to cooperate with startups and innovative companies that seek ways to expand their operations.”

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Three times as many SMEs are satisfied than dissatisfied with COVID-19 support from their bank or building society

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Three times as many SMEs are satisfied than dissatisfied with COVID-19 support from their bank or building society 3
  • More SMEs are satisfied (38%) than dissatisfied (13%) with their COVID-19 banking support
  • Decline in SMEs using personal current accounts for business banking as more seek access to the Government-backed lending scheme
  • Fewer SMEs believe nearby branches are important when choosing a bank or building society
  • 15% of SMEs use mobile or online banking more often than before the COVID-19 pandemic
  • When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account

Three times as many SMEs have been satisfied than dissatisfied with the COVID-19 support available from their bank or building society, according to YouGov research commissioned by the Current Account Switch Service.

Overall, four in ten SMEs (38%) were satisfied with the support they received from their business current account provider since the pandemic began. This contrasts with one in ten SMEs (13%) who were dissatisfied.  In general, more than half of SMEs (55%) are satisfied with their current business bank account, compared to 8% who are dissatisfied. However, inertia remains a problem as half of SMEs (50%) said they would not look to switch business accounts even if they were dissatisfied with their current bank or building society.

When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account. Advanced digital features (35%), good interest rates (34%), and a personal connection through a relationship manager (33%) also mattered.

The SME banking research was conducted both in February and in September 2020. It also reveals that since the start of the pandemic, the proportion of SMEs using business current accounts has increased from 69% in February to 74% in September as firms are required to have a business account to receive access to the Government-backed lending schemes.

However, one in five SMEs (20%) still use a personal current account for their business banking needs, despite the risk that tax liabilities get confused, and calculations are made incorrectly. These businesses are also missing out on a range of business-only banking benefits such as integrated accounting software or invoicing tools offered by different providers.

In addition, the research shows the importance of branches to SMEs has declined over the seven months. When asked in February, more than a fifth of SMEs (22%) said the availability of nearby bank branches was important when selecting their bank or building society, compared to 17% in September.  However, the Post Office could be fulfilling the role of branches in some areas.

The declining importance of nearby branches was most noticeable in the North East region where 35% of SMEs believed branches were important in February, falling to 18% in September. The importance of nearby branches also varies between industries. One in ten IT companies (11%) said nearby branches were an important factor compared to nearly three in ten (29%) leisure and hospitality businesses.

While branches are less important, digital banking use has increased for some SMEs. Several firms have started to use online banking for the first time as 15% of SMEs say they use mobile or online banking more often than before the social distancing measures were introduced.

Maha El Dimachki, Chief Payments Officer of Pay.UK, owner and operator of the Current Account Switch Service, said: “Across the country, banks and building societies have been working hard in difficult circumstances to meet customer needs. Thanks to that work, small and medium-sized enterprises are more likely to say they are satisfied than dissatisfied with the support they received from their business account provider since the pandemic started. But lockdown has changed small business behaviour dramatically, in a way that points to significant changes to their banking needs both now and in future.

“It’s encouraging to see many small businesses are generally satisfied with their business bank accounts. However, even when businesses are unhappy with their bank, some don’t consider switching as an option, despite the many benefits available. We’ll continue to raise awareness of the benefits of switching among small businesses to help them get the most from their bank account.”

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