Preparing for AML Compliance in 2024: Key Strategies and Best Practices

As 2023 comes to an end, it is a great opportunity to take stock of the past 12 months and start to look towards the year ahead. Businesses should be looking at what went well, and also where they can improve.

When making improvements and setting goals, most businesses tend to focus on two key areas; the financials – cutting costs, maximising profits and ensuring the business is running as efficiently as possible, and the customer experience.

And while these are both vitally important for the success of any business, there is one area that often gets forgotten – compliance.  

Every regulated business in the UK must, by law, have anti-money laundering (AML) processes in place. Most businesses see these compliance requirements as a nuisance – red tape that they could do without, especially if they are relying on old, outdated AML systems.

However, the right AML tools can not only ensure compliance with the latest rules and regulations but can also help increase profit, improve efficiency and create a much better customer experience.

Knowing your obligations

When it comes to AML and compliance, the first thing businesses must do is ensure they understand their requirements. In the UK, AML regime requirements are set out in the Proceeds of Crime Act 2002 (POCA 2002), the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017), the Terrorism Act 2000 (TA 2000), the Crime and Security Act 2001 (ATCSA 2001) and the Terrorism Act 2006 (TA 2006).

The 5th EU Anti-Money Laundering Directive was adopted by the UK, and although the UK has opted out of transposing the 6th Anti-Money Laundering Directive (which was due by 13 December 2020), this is primarily due to the fact that many of its requirements are already covered by existing UK law.

Each money laundering update comprises of a number of key changes, for example, 6MLD made it possible for corporations as well as individuals to be prosecuted for money laundering crimes, the key requirements for regulated businesses have remained the same for a number of years. These are:

• Identification and verification - Every regulated business must ensure that they identify and verify every new customer – individual and corporate – at the onboarding stage.

• Screening - Once the individual or business has been verified, they must be screened against Sanctions and PEP lists, to ascertain the threat they pose – if any – to the business. This has always been an incredibly important part of the customer due diligence process but has become even more so since Russia invaded the Ukraine, and a huge number of sanctions were placed on Russia.

• Enhanced due diligence - If, during the verification and screening process, a business discovers that there is a potential risk with a customer, enhanced due diligence must be performed. This is the process of conducting further checks into the individual or business to check if they do in fact pose a threat, and if so, whether this threat is serious enough to prevent them from becoming a customer. Enhanced due diligence will include deeper background checks, full financial analysis, and adverse media and social media checks.

• Regular monitoring -As well as performing the initial verification and screening checks on their customers, firms must also regularly monitor all customers for any changes to their circumstances. There is no hard and fast rule on how often these checks should run, but daily is the only way to ensure the customer details are up to date, and that there have been no breaches in terms of working with sanctioned individuals or entities.

Record keeping - Regulated firms must keep records of all their customer checks in order to maintain a clean and compliant position. 

Meeting your obligations

Many businesses still see AML as an expensive, time-consuming process that eats up valuable time and resources. This is often why many do not invest in compliance; according to SmartSearch’s latest report, Electronic Verification Uncovered II, 52% of regulated firms still rely on manual processes, while two-thirds regularly leave themselves open to risk because they do not ‘always’ run proper checks on new customers.

One of the reasons why many firms feel they cannot justify a large investment into compliance technology is the fear that the solution they buy will soon be out of date – or that they will be committed to paying significant sums each time their processes need updating.

That is why it is vital that, when investing in an AML solution, businesses make an informed choice, and opt for a solution that is not only fit for purpose now, but will remain so.

Preparing for 2024

The best thing a regulated business can do to ensure it is ‘AML ready’ for 2024, is to invest in a system that does three key things:

• Ensures the business meets its compliance requirements

• Ensures the business will continue to meet its requirements even when rules change

• Improves overall efficiency

SmartSearch is one of the leading digital compliance providers in the UK. Its innovative solution offers identification, verification, screening, data hosting and real-time monitoring all from one easy-to-use, cloud-based platform to ensure regulated businesses meet their requirements.

Furthermore, thanks to continual improvements and enhancements, that are employed both in response to regulatory changes and customer feedback, SmartSearch can ensure clients are compliant now, and will remain so going forward, with no need to commit to expensive updates to their processes.

And thirdly, thanks to SmartSearch’s innovative use of the latest technology, and AI techniques, not only does the platform provide an AML solution but actually helps clients improve their onboarding processes and workflows, and even creates further business opportunities along the way.

Investing in an AML solution

SmartSearch’s enhanced platform, launched at the end of 2023, takes digital compliance to the next level by incorporating AML expertise with the latest in compliance technology and includes several key updates. These include:

• Triple bureau identification– SmartSearch was already taking global data from Experian and Equifax, and the enhanced platform also sources data from TransUnion, giving SmartSearch the highest match and pass rate on the market

• Perpetual KYC (pKYC) – thanks to the triple bureau capabilities, and access to Global screening and watch list, SmartSearch runs initial checks and then automatically re-runs client searches continually, delivering instant access to the latest search outcomes and audit trails

• SOF Checks – New for 2023, the platform now uses open banking to determine the source of the funds

• Automation and configurability - solutions can now be fully tailored to each business’s unique needs including custom risk profiles and configurable watchlist screening and fully automated workflows, and every service can be integrated with users existing systems through Restful APIs.

Not only do these enhancements ensure regulated businesses are meeting their AML and compliance obligations with increased reliability, but can also improve efficiency, cut costs and increase profits. For example, thanks to the new configurability and automation clients now have more control over their compliance and increased operational efficiency, which saves time and money while the pKYC functionality helps clients know their customers better, and therefore creates opportunities for revenue generation.

To find out more about how SmartSearch can help your business make a great start to 2024, visit www.smartsearch.com