AML/KYC regulators have had quite the year ensuring that banks are correctly complying with standards. As government bodies mandated more heavy compliance regulation, here are a few of this year’s top compliance stories and things to look out for in 2022 in the world of finance.
What Happened in 2021?
In total, there was $10.4 billion in fines given to the financial companies in the United States. More recently, the Washington Federal Bank (WAFB) based in Seattle was fined $2.5 million for AML/BSA deficiencies. The failure of financial institutions like WAFB, Helix, and European-based bank SEB Bank to implement proper AML/BSA compliance protocol cost them millions in fines. Helix operator Larry Dean Harmon is even facing up to 20 years in prison and pled guilty to laundering over $300 Million in Bitcoin.
Countries with notable AML compliance changes in 2021:
- Philippines -AML Act passes February 8, 2021
- The Hong Kong Monetary Authority (HKMA) announced new AML guidelines in April.
- The UAE Central Bank made suspicious activity reporting requirements in June, and Dubai established an AML court.
- In Europe, the Sixth Directive was issued with the implementation date of June 3rd, 2021. The “AML Package” was introduced in July which consists of two new regulations, a new AML Directive, and the proposal for the revision of an already existing Regulation on the transfer of funds.
- Canada has added a number of industries and businesses to fall under the scope of the PCMLTFA regulations, requiring them to register as reporting entities. The new sectors falling under this are cryptocurrency-related businesses, prepaid credit card issuers, life insurance providers, foreign money services businesses, businesses involved with virtual currency transactions.
- US FinCEN Offers Guidance On The Final Customer Due Diligence (CDD) Rule
- The AML Act of 2020 came into effect in 2021, the most significant changes to the Bank Secrecy Act of 1970 since the PATRIOT Act of 2001.
To prevent financial organizations from incurring similar fines, penalties, and legal trouble, proper risk management and compliance processes need to be in place as lines of defense. Implementing processes such as Client Lifecycle Management (CLM) and a risk and compliance team or ‘council’ can help companies manage risk. There are a number of tactics that lead to clear outlines of internal requirements but the primary goal is to have a risk-averse mindset and planning process at every level of the business that considers financial, legal AND reputational risk in terms of their possible effects on the business. Leveraging the best technologies for compliance, including the best data to make risk decisions, is a key part of assessing and managing risk in an efficient way.
Looking Forward to 2022
With regard to things to expect in the new year, FINRA (Financial Industry Regulatory Authority) released Regulatory Notice 21-36 in October, signaling to security firms that new AML/CFT regulations are coming in 2022. The new regulatory notice highlighted the previous priorities and encouraged firms to begin developing and implementing proper AML protocol to achieve and monitor the members’ compliance with the requirements of the Bank Secrecy Act.
Other changes to prepare for in 2022:
- Stringent Crypto Regulations
- Increased Use of Artificial Intelligence
- UBO Laws to Have More Transparency in 2022
- Enhanced AML Screening Solutions
- Enhanced Focus on Digital Payment-Related Issues
- Robust Transaction Monitoring Solutions
Changes are accelerating in regulations and technology so check back in for more updates as we see what 2022 holds in store for us.