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How to Identify and Address AML Gaps to Mitigate Risk of Potential Enforcement Actions


Given the increasing complexity of today’s AML policy environment, being subject to regulatory scrutiny is a reality that can transpire virtually for everyone. However, in the analysis of most cases, common themes related to AML deficiencies do emerge that if addressed, can greatly lower the chances of adverse regulatory investigation and potentially an enforcement action. Here is how to identify and address some AML Gaps to mitigate risks.


Identifying and Addressing AML Deficiencies

Simply issuing AML policy compliance statements is highly insufficient. Regulators are not only concerned with a solid compliance framework but also how it is implemented and enforced within the organization. Thus, a strong AML compliance entails a holistic approach covering such areas as:


Corporate Governance

There is a strong link between weak corporate governance and the risk of potential enforcement actions. Boards and senior management that delay or even refuse to take the necessary actions to remediate systemic issues generally invite greater regulatory security. A helpful recommendation may be to ensure all internal stakeholders are thoroughly educated on the policies and enforcement actions and setting a clear chain of accountability.

Risk Analysis and Testing

Different financial institutions, depending on their size, location, history, and other factors carry different risk levels when it comes to being used by money launderers. Dedicating optimal resources towards AML compliance requires a risk-based approach.


Systemic Deficiencies

Much of the risk related money laundering stems from internal system deficiencies. Chief of which is the lack of a robust digital framework that can monitor, detect, and alert any unusual transactions in real-time and better resolve any instances of a false positive.

Establishing a transparent and strong communication environment is also important, both to ensure every stakeholder is made aware of the critical facts and that there is a centralized response to addressing potential enforcement actions.


Staff Considerations

An established AML compliance framework is only as effective as the institution’s staff that both maintain and work under it. Insider complicity is an ever-increasing threat within financial institutions. Addressing the issue starts with the very recruiting of employees – ensuring that proper due diligence is conducted in hiring.

Conducting regular training to ensure the staff remains updated with the latest changes in the regulatory environment is also key. Determining whether compliance response teams are adequately equipped with appropriate staffing, expertise, and resource is also necessitated.


Concluding Note

Setting a highly robust AML policy framework is key not just to cut the risk of potential enforcement actions but also for retaining the positive reputation and confidence among your customers. For any financial institution, identifying and addressing gaps should be elevated as a top priority.


How ComplyGenics Can Help

Many Fintech companies do not have the resources at hand to properly navigate an environment of increasingly complex regulations and compliance measures. ComplyGenics is here to help. We provide such services as compliance audit and program remediation, AML rule tuning, and model validation, helping you mitigate risks and keep up with the best industry KYC and FCP standards. We also specialize in staffing for the niche, helping you connect the right talent for your firm within the industry. For more information, visit our site or contact us.

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