Financial sector must intensify AML and CFT in era of counter terrorist financing

In his latest blog, our KYC expert calls on the finance and banking industries to intensify anti-money laundering and counter-terrorist financing procedures.

The rise of fundamentalist groups and acts of terrorism has caused a re-think of counter-terrorist financing procedures all over the world. Terrorists seem to be well aware of how anti-money laundering and counter-terrorism laws work these days and seem to organise their regime to purposefully avoid systematic financial reporting.

For example, studies show extremist organisations use a special regime of funding to avoid being reported: small amounts of money are rather difficult to trace, especially if there are lots of people involved, and a small amount doesn’t necessarily trigger counter-terrorism financing alarm bells while adhering to anti-money laundering reporting requirements in the banking system.

The fight against terrorist financing took a fascinating turn recently as several international hacking groups announced plans to target the banks, countries and individuals who they said had helped to finance terrorist organisations. These efforts underscore the need for governments, banks and regulators to work harder at rooting out the sources of funding.

Experts agree that fundamentalist groups are funded primarily by external transactions such as black market oil sales and ransom payments, as well as internal transactions such as tax collection, human trafficking and bank takeovers. When external transactions are completed in cash, they have ties to the formal banking system. For example, ransom payments originate from bank accounts of insurance companies and government agencies in the European Union, which use brokers to make cash payments to terrorists.

Today, more than ever, banking and financial sectors must intensify anti-money laundering (AML) and CFT (combating the financing of terrorism) controls and procedures. They must consider the relevance of those controls and really know and understand their customers and their relationships, as well as the sectors and geography of their activity.

Accordingly, ongoing due diligence duties must include the continuous monitoring of customers’ personal data by checking the “black persons list” publicly-accessible and made available by all the different competent authorities all over the world.

Let’s imagine, then, how large the size of a customers’ personal data for a financial intermediary could be - and, consequently, how much time and persons assigned and costs related occur to ensure an institution can check all data with public lists or searching for news related to the customer.
 
A more effective and independent solution could be to work with a Know Your Client (KYC) service provider who is dedicated to maintain updated of KYC data on an ongoing basis, signaling daily anomalies on customers’ names and data. This can help to bridge an information gap, and could result in cost and time savings for your organisation.

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Massimo Paolo Gentili
Massimo Paolo  Gentili
Opinion

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