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Regulatory Risk

Why the fight against money laundering never stops

Malcolm Wright

22 Sep 2016


A member of the homicide squad holds plastic evidence bags containing unclaimed items, including photos, money and a travel pass, that belonged to a migrant who died during their journey to Europe, in the police department in Palermo, Italy November 4, 2015. Sandy and grimy, the watches, cell phones, family photos, $100 bills, and passports from Syria, Pakistan and Sudan are the tattered possessions of migrants who died at sea. Italian homicide police removed the items from the corpses of about 90 men, women and infants who perished aboard three different boats this summer. They preserved the personal effects - a beaded necklace, a Koran, a wedding picture, an Istanbul bus pass - as potential evidence to use in court against their smugglers, and in a bid to identify the corpses. REUTERS/Tony Gentile PICTURE 13 OF 15 FOR WIDER IMAGE STORY
REUTERS/Tony Gentile

With money launderers constantly changing their methods, firms must ensure their transaction monitoring systems are kept up to date. The consequences of not doing so can be catastrophic.

Money laundering has the potential to threaten national security, national prosperity and international reputation.

That was the stark warning from the UK’s National Crime Agency in a recent report in which it identified high end money laundering as one of its top five threats for the year ahead.

Find out more about Thomson Reuters Transaction Monitoring 

At an international level, the agency says that money laundering typically accounts for between 2% and 5% of GDP.


Terror funding

In Europe, terror attacks in Belgium and France, which many believe were funded through insufficiently regulated payment mechanisms, have prompted the EU to bring forward its Fourth Anti-Money Laundering Directive to the end of 2016.

Its powers now cover mechanisms such as virtual currencies, e-wallets and pre-paid cards. Professional ‘enablers’ like accountants and lawyers are increasingly coming under scrutiny, as are realtors and casinos.


Download the full infographic for the Fourth EU AML Directive

It’s a similar story across the world, where national and international regulators are spreading their net wider and making the holes smaller for criminals to wriggle through.

Fighting back

In the battle against money laundering there are two main lines of defense.

The first method is establishing, thoroughly and in detail, the facts: how well do you know your customer and are they who they say they are?

In this area, Thomson Reuters World-Check Risk Intelligence, KYC as a Service and Enhanced Due Diligence can provide valuable support through data, technology and human expertise.

The second method is transaction monitoring. Its focus is on behaviour, comparing a customer’s transactions with not only their previous record but what one might reasonably expect given their type of business or occupation.


Thomson Reuters Transaction Monitoring screens for this type of suspicious financial activity while also supporting the Know Your Customer (KYC) processes — all on a single platform.


Personal risk

Individual compliance officers are increasingly being singled out by regulators. When the UK’s Financial Services Authority fined a Swiss bank £525,000 for failing to establish and maintain adequate AML systems, it also fined the bank’s former Money Laundering Reporting Officer for his shortcomings.

But this settlement was dwarfed when a Florida bank was fined a total of US$6.5 million, with the US Financial Crimes Enforcement Network citing the failure to implement an effective AML compliance program.

Warning signs

While many banks and other regulated entities have stepped up their KYC procedures, some overlook the need to also sharpen their transaction monitoring systems or have a system in place.

This oversight is potentially catastrophic. The methods used by money launderers are constantly changing as they look to circumvent current procedures.

If your transaction monitoring system has not been reviewed and updated in the last year, it may not be picking up the latest warning signs. And that false sense of security could make you a potential target for both money launderers and regulators.

Find out more about Thomson Reuters Transaction Monitoring 


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