How important is it to comply with Anti-Money Laundering (AML) regulations? Consider what happened to the largest regional bank in the U.S. On February 15, 2018, U.S. Bancorp was fined US$613 million in penalties for violations of the Bank Secrecy Act and a faulty anti-money laundering (AML) program. In the face of terror attacks, drug trafficking and other nefarious activities, money laundering is a growing concern that cuts across borders and societies. This leads to the importance of banks and financial institutions (FIs) taking their UBO (Ultimate Beneficial Ownership) compliance with utmost seriousness. Globally, cases such as the Paradise Papers, Unaoil and VimpelCom reiterate the need for deep, complex, thorough customer due diligence. The objective is clear: financial institutions should identify and verify who their customers are and where their funding originates with the ultimate goal of preventing money laundering or terrorist financing. Not only is knowing your business clients an important risk mitigation strategy, it also is increasingly becoming a legal requirement such as the 4AMLD requirements in Europe, or the FinCEN Final Rule in the US. To accomplish these objectives, financial institutions must be capable of identifying the beneficial owners of every legal entity customer. Who Are UBOs and Why Do They Matter? A UBO refers to any person with direct or indirect ownership or control of an entity. Obtaining accurate beneficial ownership information is crucial to: Ensure that the FIs perform screening and provide risk rating for all the required parties against Politically Exposed Persons (PEPs) or as having negative news associated with the UBOs. Ensure FIs do not do business with sanctioned customers associated with the UBOs. Understand the potential risk that a UBO poses to an FI through its relationship with multiple customer and vendors. But, contrary to popular belief, identifying the ultimate beneficiary of an account – especially one concealed through a complex web – is not easy. Specifically, there are eight key challenges that FIs have to deal with: Corporate transparency is severely hampered by fragmented and inconsistent data held in national registers around the globe. Entering into a contract or business relationship with a company without full knowledge of beneficial ownership, past or present, introduces significant risk to an organization. Legal corporate structures with multiple layers of ownership increases the number of entities to be verified. A tendency to perform reactive, document-centric and manual processes that cannot help actively manage risk and compliance. A lack of standardized documentation across various countries, making the job of supporting compliance obligations and validating ownership much more difficult. In jurisdictions where it is easy to transfer ownership, the financial institution may not be aware of changes, which may impact the client risk profile and risk appetite of the bank to do business with the customer. Complicated by layers of structures, corporate vehicles and jurisdictional laws, financial institutions may find it difficult to detect changes in profiles or suspicious patterns. Data silos also hinder detecting beneficiary exposure making it crucial to use technology to link data and information stored in different repositories. Effective and Advanced Ways for Identifying and Verifying UBOs When onboarding a new business customer, FIs must perform customer due diligence (CDD) and, in some higher risk cases, enhanced due diligence (EDD). The process requires validating company vitals, identifying the beneficial owners and verifying the UBOs. One of the biggest challenges that FIs face is collecting UBO information. The multi-jurisdictional nature of the regulatory market can make it very difficult in terms of whether you go to a 25 percent level, a 10 percent level or even a 2 percent level share of an institution’s voting rights. Recently, FIs have started to adopt emerging technologies, such as Artificial Intelligence and Machine Learning, to identify UBO information. However, some of the more complex trust structures are likely to always remain challenging when it comes to establishing who the UBOs are. To overcome this challenge, organizations need a robust framework to manage risk and compliance. That’s where a strong RegTech partner with proven KYB and KYC capabilities comes to the fore. Automating data collection, storage and integration for easy information retrieval is one of the key elements to making UBO due diligence faster, more efficient and more reliable. This can provide a holistic view and situational awareness of relationships. A clear, structured design of data sets that is well-defined for ease of use, flow, processing, and reporting is critical for this automation to work. Using an Application Programming Interface (API) within the system can help integrate workflow and content management, enabling faster onboarding and a robust due diligence process to meet both business and regulatory requirements. How mobile can offer increasing protection against modern fraud In a world where interaction is increasingly made through screens rather than face-to-face, it is often difficult for companies to tell exactly who their customers are online, which poses a serious risk to security and compliance. This threat is doubled by increasing legislative pressure. A host of new regulations passed at the end of 2017 mean that companies have to focus more and more on knowing exactly who their customers are. The end of January was the final deadline for financial services firms to register ‘ultimate beneficial owners’ so that the individuals behind every account, and those who benefit from it, are clearer. The Fourth Anti-Money Laundering Directive (4AMLD) stipulates that companies need to be aware of the ultimate identity of business entities in order to help prevent the development of shell companies for tax evasion and money laundering, among other financial crimes. Under the Second Payment Services Directive (PSD2), which also came into effect in January, many transactions above £30 are subject to a two-factor authentication process, which verifies the identity of the customer through two separate pieces of information. This can be based on something they know, such as a password; something intrinsic about them, such as biometric data like fingerprints or facial appearance; or something they possess, such as specific documentation. In a digital age, this is easier said than done. Gone are the days when customers walk into a branch to set up their bank account in person. The vast majority of financial interactions nowadays are carried out simply through the click of a mouse or, more recently, the swipe of a phone. The number of mobile phone users in the world is expected to surpass the 5 billion mark by next year. Last year, mobile transactions overtook those made online and in branches – according to data by Visa. Mobile Network Operators (MNOs) But this increasing shift to mobile devices can provide a KYC opportunity, offering another item that customers possess, and can use to identify themselves. With access to Mobile Network Operators (MNOs), financial services firms can access another form of identification – possession of a specific handheld device. This usually involves an SMS text message being sent with a verification code to the user’s mobile. The code can then be used to authenticate that the account being accessed is by the owner of the phone, verifying identity through possession of the device. MNOs already have access to extensive identity information on their subscription holders, as they are also expected to meet stringent KYC requirements. Financial Services firms can use this vital layer of identification and compare it against other pieces of evidence, such as document and passwords, for the benefit of all parties. Another useful function of handheld devices is their capacity to record biometric data. The majority of smartphones include a front-facing camera that can be used to take a photo, capturing inherent data about a person’s appearance. As technology on phones improves, this opens up opportunities for further layers of authentication. Many iPhones have the capacity to register fingerprints, as well as the facial recognition capacity extensively advertised in the iPhone X. Mobile Biometrics At the moment, these innovations are limited to higher-end devices. However, as this capability becomes more widespread amongst devices, using further biometric data proofs for customers will become increasingly feasible. Additionally, the ability of mobile devices to verify identity has a wider potential for citizens of the world. Vast numbers of the global population are unbanked, not included in the financial system, and without a financial identity. But the extreme reach of mobile technology could change this. In Mexico, for instance, only 40 percent of adults have a bank account, yet there are 80 phone subscriptions for every 100 people. Being unconnected to any formal bank can leave many people financially disempowered, unable to access any kind of financial services, which leaves their funds insecure and without growth potential. The ability to verify identity through mobiles means that previously unbanked individuals can be provided with access to financial services in the future. In an increasingly globalised world, borders are becoming more fluid. The global population is more mobile than ever, with many people moving between borders for work or shopping in foreign countries over the internet. Cross-border eCommerce, for instance, is growing at 25 percent annually. As individuals and money routinely travel increasing distances between geographical and legislative areas, this makes securing identity and tracing transactions more difficult than ever. But mobile devices can be taken across borders and connected to their original MNO via other local networks. In a growingly interconnected world, as fraud threats become more sophisticated and regulation more stringent, mobiles and their networks can provide a consistent proof of identity that brings security and increased access to financial services for everyone. Posts navigation Previous 1 … 141 142 143 … 158 Next
How important is it to comply with Anti-Money Laundering (AML) regulations? Consider what happened to the largest regional bank in the U.S. On February 15, 2018, U.S. Bancorp was fined US$613 million in penalties for violations of the Bank Secrecy Act and a faulty anti-money laundering (AML) program. In the face of terror attacks, drug trafficking and other nefarious activities, money laundering is a growing concern that cuts across borders and societies. This leads to the importance of banks and financial institutions (FIs) taking their UBO (Ultimate Beneficial Ownership) compliance with utmost seriousness. Globally, cases such as the Paradise Papers, Unaoil and VimpelCom reiterate the need for deep, complex, thorough customer due diligence. The objective is clear: financial institutions should identify and verify who their customers are and where their funding originates with the ultimate goal of preventing money laundering or terrorist financing. Not only is knowing your business clients an important risk mitigation strategy, it also is increasingly becoming a legal requirement such as the 4AMLD requirements in Europe, or the FinCEN Final Rule in the US. To accomplish these objectives, financial institutions must be capable of identifying the beneficial owners of every legal entity customer. Who Are UBOs and Why Do They Matter? A UBO refers to any person with direct or indirect ownership or control of an entity. Obtaining accurate beneficial ownership information is crucial to: Ensure that the FIs perform screening and provide risk rating for all the required parties against Politically Exposed Persons (PEPs) or as having negative news associated with the UBOs. Ensure FIs do not do business with sanctioned customers associated with the UBOs. Understand the potential risk that a UBO poses to an FI through its relationship with multiple customer and vendors. But, contrary to popular belief, identifying the ultimate beneficiary of an account – especially one concealed through a complex web – is not easy. Specifically, there are eight key challenges that FIs have to deal with: Corporate transparency is severely hampered by fragmented and inconsistent data held in national registers around the globe. Entering into a contract or business relationship with a company without full knowledge of beneficial ownership, past or present, introduces significant risk to an organization. Legal corporate structures with multiple layers of ownership increases the number of entities to be verified. A tendency to perform reactive, document-centric and manual processes that cannot help actively manage risk and compliance. A lack of standardized documentation across various countries, making the job of supporting compliance obligations and validating ownership much more difficult. In jurisdictions where it is easy to transfer ownership, the financial institution may not be aware of changes, which may impact the client risk profile and risk appetite of the bank to do business with the customer. Complicated by layers of structures, corporate vehicles and jurisdictional laws, financial institutions may find it difficult to detect changes in profiles or suspicious patterns. Data silos also hinder detecting beneficiary exposure making it crucial to use technology to link data and information stored in different repositories. Effective and Advanced Ways for Identifying and Verifying UBOs When onboarding a new business customer, FIs must perform customer due diligence (CDD) and, in some higher risk cases, enhanced due diligence (EDD). The process requires validating company vitals, identifying the beneficial owners and verifying the UBOs. One of the biggest challenges that FIs face is collecting UBO information. The multi-jurisdictional nature of the regulatory market can make it very difficult in terms of whether you go to a 25 percent level, a 10 percent level or even a 2 percent level share of an institution’s voting rights. Recently, FIs have started to adopt emerging technologies, such as Artificial Intelligence and Machine Learning, to identify UBO information. However, some of the more complex trust structures are likely to always remain challenging when it comes to establishing who the UBOs are. To overcome this challenge, organizations need a robust framework to manage risk and compliance. That’s where a strong RegTech partner with proven KYB and KYC capabilities comes to the fore. Automating data collection, storage and integration for easy information retrieval is one of the key elements to making UBO due diligence faster, more efficient and more reliable. This can provide a holistic view and situational awareness of relationships. A clear, structured design of data sets that is well-defined for ease of use, flow, processing, and reporting is critical for this automation to work. Using an Application Programming Interface (API) within the system can help integrate workflow and content management, enabling faster onboarding and a robust due diligence process to meet both business and regulatory requirements.
How mobile can offer increasing protection against modern fraud In a world where interaction is increasingly made through screens rather than face-to-face, it is often difficult for companies to tell exactly who their customers are online, which poses a serious risk to security and compliance. This threat is doubled by increasing legislative pressure. A host of new regulations passed at the end of 2017 mean that companies have to focus more and more on knowing exactly who their customers are. The end of January was the final deadline for financial services firms to register ‘ultimate beneficial owners’ so that the individuals behind every account, and those who benefit from it, are clearer. The Fourth Anti-Money Laundering Directive (4AMLD) stipulates that companies need to be aware of the ultimate identity of business entities in order to help prevent the development of shell companies for tax evasion and money laundering, among other financial crimes. Under the Second Payment Services Directive (PSD2), which also came into effect in January, many transactions above £30 are subject to a two-factor authentication process, which verifies the identity of the customer through two separate pieces of information. This can be based on something they know, such as a password; something intrinsic about them, such as biometric data like fingerprints or facial appearance; or something they possess, such as specific documentation. In a digital age, this is easier said than done. Gone are the days when customers walk into a branch to set up their bank account in person. The vast majority of financial interactions nowadays are carried out simply through the click of a mouse or, more recently, the swipe of a phone. The number of mobile phone users in the world is expected to surpass the 5 billion mark by next year. Last year, mobile transactions overtook those made online and in branches – according to data by Visa. Mobile Network Operators (MNOs) But this increasing shift to mobile devices can provide a KYC opportunity, offering another item that customers possess, and can use to identify themselves. With access to Mobile Network Operators (MNOs), financial services firms can access another form of identification – possession of a specific handheld device. This usually involves an SMS text message being sent with a verification code to the user’s mobile. The code can then be used to authenticate that the account being accessed is by the owner of the phone, verifying identity through possession of the device. MNOs already have access to extensive identity information on their subscription holders, as they are also expected to meet stringent KYC requirements. Financial Services firms can use this vital layer of identification and compare it against other pieces of evidence, such as document and passwords, for the benefit of all parties. Another useful function of handheld devices is their capacity to record biometric data. The majority of smartphones include a front-facing camera that can be used to take a photo, capturing inherent data about a person’s appearance. As technology on phones improves, this opens up opportunities for further layers of authentication. Many iPhones have the capacity to register fingerprints, as well as the facial recognition capacity extensively advertised in the iPhone X. Mobile Biometrics At the moment, these innovations are limited to higher-end devices. However, as this capability becomes more widespread amongst devices, using further biometric data proofs for customers will become increasingly feasible. Additionally, the ability of mobile devices to verify identity has a wider potential for citizens of the world. Vast numbers of the global population are unbanked, not included in the financial system, and without a financial identity. But the extreme reach of mobile technology could change this. In Mexico, for instance, only 40 percent of adults have a bank account, yet there are 80 phone subscriptions for every 100 people. Being unconnected to any formal bank can leave many people financially disempowered, unable to access any kind of financial services, which leaves their funds insecure and without growth potential. The ability to verify identity through mobiles means that previously unbanked individuals can be provided with access to financial services in the future. In an increasingly globalised world, borders are becoming more fluid. The global population is more mobile than ever, with many people moving between borders for work or shopping in foreign countries over the internet. Cross-border eCommerce, for instance, is growing at 25 percent annually. As individuals and money routinely travel increasing distances between geographical and legislative areas, this makes securing identity and tracing transactions more difficult than ever. But mobile devices can be taken across borders and connected to their original MNO via other local networks. In a growingly interconnected world, as fraud threats become more sophisticated and regulation more stringent, mobiles and their networks can provide a consistent proof of identity that brings security and increased access to financial services for everyone.