International money laundering has reached global and stratospheric proportions.

Volumes of funds laundered are estimated to run into trillions of dollars annually and seen to be between two to five per cent of the world’s GDP. Criminal and terror networks have become experts at laundering funds through bona fide financial systems and networks. The incentive and initiative remains on the side of the criminal, who strives continuously to adapt and improving his techniques while national and international regulations struggle to stay abreast. Money launderers seemingly never fail to discover how loopholes, individuals and lax regulation can be manipulated and exploited to further their means.

Assessing risk is an essential function of sound business practice, particularly in the financial sector. It also remains one of the most complex strategic requirements, particularly because meaningful risk assessment needs to be almost by-the-minute analysis of fast-changing realities. The constantly changing environment e.g. legislative, technological, economic and political, in which banks operate means their risk assessment protocols must constantly evolve and adapt.

The rapid pace of change is in itself a risk: financial services providers are bound by a vast array of other regulatory and legal provisions and quick adaptation and response to environmental changes is not endemic to the way that financial services operate. These and other challenges are readily addressed by consulting experts, who have over the course of decades developed theories as well as strategies that enable financial service providers to better acclimate to this constant and seemingly endless challenge.

Banks must assume that with each new technological change, be it a new device, virus, or software update comes a correlated risk that their systems cannot adapt as quickly as a criminal’s ability to exploit those changes. Additionally, with every step taken to narrow or eliminate a bank’s money-laundering risk through technological investment, procedural changes or improved detection protocols, criminals are conducting their own risk assessments and evolving in tandem and in most cases more quickly.

It is sobering to realise that money laundering explicitly enables a plethora of crimes: corruption, drug and human trafficking, trade in threatened species, market manipulation and fraud. Consequently, stronger and more wide-reaching AML laws and regulations are actively being promulgated by governments across the globe, keen to keep their hands and economies clean of illicit and criminal funds. It is incumbent on financial institutions to do their part, putting a stranglehold on funds that may be used to put people under threat of extreme and unexpected violence.

This means that in addition to existing regulatory requirements banks and other financial service providers are expected also to adhere to ever-increasing AML regulations – specifically those in high-value financial centres such as Europe and America where regulations are typically enforced within the financial, gambling, remittance and bullion trade. To add to the complexity, Anti-Money Laundering (AML) regulations differ in various territories, adding a specifically complex layer to any trade-based financial transaction.

Letters of credit have been identified as a key weak-point within the process of TBML, and increasingly banks and other financial institutions are required to implement strenuous controls over personnel, as well as incorporate checks and balances that acknowledge how susceptible and permeable the process of issuing letters of credit can be.

Other key points of a functioning AML strategy include ‘know your customer’ (KYC) processes, which requires systematic reporting and validation services, while Customer Due Diligence (CDD) requires institutions to scrutinise their clients’ business relationships as well as means with which to identify unusual or suspect transactions.

In the course of our appraisal of your organisations AML risk, we can also assess your broader regulatory and fiduciary responsibilities. Mayfair Compliance can develop an accurate profile of what the overarching risk profile of your organisation is and advise on comprehensive strategies that align with the most current AML requirements for your region.

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