RegTech industry experts have spoken out in support for the FCA’s recent call for ‘purposeful’ AML controls and financial fraud action.
Speaking at the AML & ABC Forum 2021 at the end of March, Mark Steward, Executive Director of Enforcement and Market Oversight and a member of the Executive Committee at the FCA addressed some of the investigations, legal cases and challenges facing recent money laundering activity in the UK, and called for better systems and controls that are “purposeful, efficient and courageous in identifying suspicious activity.”
Mr Steward went on to state that system and controls currently in place are flawed. Reference to the £37.8m fine imposed on Commerzbank AG’s London Branch and the £96.6m fine against Goldman Sachs for systematic AML failures were used to showcase inadequate screening and fraud detection systems. No comment was made towards the most recent criminal case against NatWest due to ongoing investigations.
Interestingly, Mark Steward also stated that AML systems are at significant risk of becoming overly complicated, bureaucratised, vulnerable to gaming by less scrupulous players, and expensive. He therefore suggested that AML systems and controls “must be focussed explicitly on the activating purpose and function of those controls, to ensure the system is not just a bureaucratic process and to ensure it cannot be gamed.”
He also drew reference to modern day challenges which must be considered, including the surge in online investment promotions targeting offers from unauthorised issuers without FSMA approvals, potential investment scams and other too good to be true promotions, including lead generation sites. Another area of risk pertains to cryptocurrency firms which are carrying on business in the UK but are not registered with the FCA, meaning they are likely not complying with Money Laundering regulations.
 
Speaking out in support for the FCA’s comments, Wayne Johnson, CEO at Encompass Corporation (https://www.encompasscorporation.com/), the leading provider of KYC and AML RegTech software, said:
“Existing money laundering and financial crime systems and controls in the UK are far from perfect, and the advent of Covid-19, remote working, and digital banking has made the war against financial crime all the more challenging."
“In this digital climate, identities can be more easily fabricated, fraud can go ahead undetected and thus money-laundering crime has surged over the last 12 months. Consequently, regulators and businesses must readily adapt to the constantly changing world climate and impose new policies which address the heart of this issue, instead of just imposing unnecessary, complicated or expensive restrictions on businesses which are already facing financial hardship due to the pandemic."
“With new, stricter and more complicated regulations potentially on the horizon, automated RegTech software implementation in businesses is no longer a recommendation, it must be a requirement. Without it, adhering to AML policies efficiently, cost-effectively and comprehensively is just not possible, and the fight against financial crime will be hugely benefitted by sophisticated RegTech software which is always on, always working, and can instantly and actively flag suspicious activity."