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FATF Guidelines In Mitigating New Age Financial Crime

3 mins read

Fatihah Ramzi | 5 January 2022

In today’s heightened business and regulatory climate, organizations need to correctly identify who they’re doing business with.

In today’s heightened business and regulatory climate, organizations should not only be concerned with making profits, but also being able to correctly identify who they’re doing business with, which means verifying customers’ identities and meeting Know-Your-Customer (KYC) and Anti-Money Laundering (AML) guidelines. DigitalCFO Asia spoke to Douglas Wolfson, Director of Financial Crime Compliance at LexisNexis Risk Solutions, to find out more about how the new FATF Guidance on digital assets is going to alter the AML landscape.

The problem with KYC and AML requirements is they have the potential to make something as simple as opening a new account a long and complex journey for regulated organizations. While estimates vary, banks take an average of 24 days to complete the customer onboarding process, and many argue it will only get worse as regulations continue to increase.

Which is why it is key to rely on an external vendor that is equipped in providing quick solutions, programmes, and technologies to actively combat financial crime. Furthermore, such businesses must be familiar with the Financial Action Task Force (FATF) Guidance on Proliferation Financing Risk Assessment and Mitigation, which will assist financial institutions, enterprises, and virtual asset service providers in successfully implementing FATF requirements to recognize, evaluate, comprehend, and mitigate proliferation financing risks.

According to Douglas, “With the pandemic, we are seeing a lot more digital financial crime, account takeovers and many more as we move our workplaces virtually. But it is crucial to note that the reason we are seeing and finding more Financial Crime is because we are looking in the right place.”

From Wolfson’s commentary it is evident that the pandemic has affected the rise of financial crime. As workplaces are forced to carry out their daily operations digitally and virtually, financial crimes would have to evolve and take the same steps. However, it is also understood that companies are probably being blindsided to financial crimes that are happening to their businesses as they are not equipped in looking for them at “the right place”.

“In the current financial climate, being well-informed in Financial Crime Compliance should be a regular operational requirement. It is necessary for companies to prioritize Financial Crime Compliance especially when they are utilizing unregulated spaces such as global payment systems.”

Douglas Wolfson, Director of Financial Crime Compliance at LexisNexis Risk Solutions.

He also commented that “CFOs are the most important key to stopping financial crimes. The most critical aspect to preventing any financial crime comes from understanding the potential financial crimes to your business and how you can prevent such occurrences.”

Many CFOs will be impacted by the recent modifications to the FATF advice in Terrorist Financing Risk Assessment, as all organizations will be expected to adhere to the anti-money laundering legislation. Each company is responsible for ensuring that AML protocols are overseen by top management. This supervision job does not always fall to the CFO, but when it does, finance executives must ensure that they are aware of the risks and have policies in place to mitigate them.

Despite the fact that CFOs are not responsible for physically implementing financial crime mitigation measures, they are the ones who will establish the infrastructure and give the direction needed to get the job done. All in all, a culture of compliance is the utmost importance in combating financial crime. Organizations can have all the technologies and programmes in place to mitigate such crimes but if CFOs and the employees do not do their due diligence in keeping an eye out for financial crimes, companies will continue to remain at large risk.

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