AML Report

All over the world, anti-money laundering (AML) compliance regimes are undergoing sweeping changes. Currently, in the U.S., AML regimes are experiencing a radical transformation as a result of shifting economic sanctions, new Ultimate Beneficial Owner (UBO) data-reporting demands, and cybercrime.

In order to better understand how financial institutions in the US are responding to regulatory disruption and other technological threats, Thomson Reuters surveyed more than 430 AML compliance leaders and revealed findings in the 2017 Thomson Reuters US AML Insights Report.

The survey highlights how financial institutions (FIs) have had to perform sweeping overhauls of the way they screen, monitor and report on customers – thanks to the evolving processes of the U.S. Treasury’s Office of Foreign Asset Control (OFAC).

Tighter Restrictions

FIs scrambled to adjust when the Obama administration eased sanctions against Iran, Cuba, Burma and Sudan. When new penalties were levied against Russian entities for their role in the 2016 election, things became even more complicated. Additionally, the Trump administration’s recent directives added additional challenges and now FIs have until May 11, 2018 to comply with a much more onerous regulatory framework.

This framework is known as FinCEN’s Customer Due Diligence Final Rule and perhaps most importantly, requires FIs to provide information on the UBO structure of an organization, trust or business entity.

Beneficial owners are defined as a person who has significant ownership or management control over the legal entity.


Illustrating just how serious these enforcements are is the $17 million fine issued by the Financial Industry Regulatory Authority, the largest money laundering penalty ever issued by the agency – against a major broker dealer in May 2016. More staggering is the $184 million civil penalty assessed by FinCEN in January against a delinquent money service business for failing to implement an effective risk-based AML program.


[tweet_dis excerpt=".@ThomsonReuters - 58% of AML compliance leaders said accessing #UBO data as their greatest challenge. #KYB "]According to the survey, 58 percent of participants cited the UBO data as their greatest operating challenge.[/tweet_dis] Only three in five survey respondents stated they are confident their organizations will be able to comply with FinCEN’s new rule by the 2018 deadline.

Overall, the greatest operational challenge related to beneficial ownership was the inability to validate UBO information. Difficulties keeping information current was a close second.

Of those who are able to verify UBO information, 89 percent of organizations reported they do so via the customer. This can be troublesome because documents can be easily forged or manipulated. Other frequently cited sources included corporate registries, company websites, search engines and third-party data vendors.

In order to meet new AML requirements, and to mitigate associated risks, 33 percent of participants surveyed revealed that their organizations were considering implementing new processes, while the remaining 67 percent of participants stated their organizations were not.

“This is problematic because local regulatory regimes, such as FinCEN, are raising the bar for transaction monitoring and data reporting,” the report states.

The Solution? RegTech

Upon analyzing the overall survey findings, the report identified two key issues; properly identifying suspicious activity and delivering a better customer experience to the vast majority of accountholders who are not engaged in illegal activity.

In response to these findings, the report cites that a data-driven framework is necessary for AML professionals to make better operational and budgetary decisions.

Globally, the goal of the report is to help US institutions stem the estimated $800 billion to $2 trillion that is laundered every year – of which less than 1 percent is seized or frozen.

The report stated:

“The financial industry is often an unwitting financier for terrorist networks, drug cartels and other criminal groups that threaten national security. Fueled by innovation and intensifying regulatory demands, RegTech has become the nucleus of financial services AML in the 21st century.

To this end, better-quality data is needed, along with next-generation technologies that automate processes and identity criminality with greater accuracy. Ultimately, the right RegTech solution can help organizations control compliance costs, allocate resources more efficiently and deliver the operational transparency needed to drive growth.”