March 25, 2020
The COVID-19 crisis, the lockdowns and travel restrictions have an immediate impact on peoples lives. Likely at least part of that impact will stay. Normal will no longer be what it used to be and some of the changes will last.
So let’s look at the impact on the field of AML/CFT in terms of risks and in terms of changed ways of working.
Risks
Actually we should talk about two different elements here. Changes in actual risks and changes in the way risks are managed and mitigated and how money laundering and terrorism finance are countered.
Actual risks are changing with the economy changes. To name but a few examples that come to mind: the value of certain goods and services changes drastically, stock prices of airlines go down, online conferencing services go up. People are stuck outside their home country and might be easy targets for human traffickers. Payment flows will change, people and companies might start to buy goods (think facemasks) from suppliers and locations they never paid to before. With goods that were never scarce before, now becoming highly in demand, there are new opportunities for bribery, money laundering and corruption. The list is endless and what Fis used to know about their clients needs to be revisited and rules for detecting suspicious transactions likely need to be amended.
On the side of the AML/CFT brigades, new risks arise as well: risk profiles might need to be redefined and risk appetite as well. Staff working from home perhaps have no or limited system access. Staff might well be distracted by health concerns or the home/work environment. With staff members falling sick, teams might get understaffed. Criminals never sleep; combatting financial crime in a normal workweek is challenging enough, as continued fines keep illustrating, a pandemic is not making it any easier.
Opportunities
With the economic and social environment changing it’s useless to assume everything will one day be the same as before again. Many clients will experience low business and thus transaction volumes. That might give Fis the opportunity to get their house in order: contact clients, update client files and supplete missing client documentation. Businesses will get into financial difficulties, might change their strategies, might start to deliver different products and services and explore new markets. In other words: what Fis know about their clients might well not be up-to-date anymore.
Fis might well take the opportunity to review BCPlans and systems in use for monitoring and filtering transactions as well as customer data systems. This is the time as well to comminicate with staff about the changing risks and ensure internal training is not neglected.
Now is the time to evaluate system stacks and consider the deployment of cloud solutions, artifical intelligence and data analytics. Both internal and expernal webinars can be deployed to optimize the communication with staff and clients.
E-learning is no longer an option or an extra, it should now become the core element of the training strategy of Fis.
Perhaps most important of all is the opportunity to redefine FEC risks, risk appetite and adopt a truly risk based approach. Regulators and Fis alike have added regulations on regulations and measures upon measures. Now is the time to start thinking from scratch and design and implement an FEC program that is based on the new reality.