What we are hearing - December 2020 – AML Compliance

As we near the end of 2020, a year that most would be happy to forget, this newsletter is focussed around some reflections on the year that was (not) and potential risk and compliance trends that we are predicting for the year(s) ahead…

Looking back at 2020

Well January to March was pretty good, until the COVID-19 wheels started falling off triggering months of uncertainty with our team, clients and partners, who were all trying to figure out the impact on their businesses and working arrangements and how to shift into new patterns of working remotely and I am very grateful to our team for the resilience and flexibility that they showed.

Despite several months of uncertainty, thankfully market conditions seem to be improving in the financial crime compliance space.

This could be to do with a couple of tailwinds, firstly, the COVID forced move to remote working highlights the benefits of using centralised risk and compliance platforms, like AML Accelerate and secondly, it might in Australia at least, to do with the increased enforcement activity against Westpac and other major corporates, providing management teams to reflect on how they can lift their game in managing financial crime risks.

So, with this year coming to a close, I thought it apt to get the crystal ball out and speculate on some of the trends that we expect to shape our economy, lives and business in 2021.

So what trends do we think will happen in 2021 – share if you agree or disagree…;-)

Looking forward to 2021

Continuation of the distributed workforce

As many countries are still battling COVID in a major way, whilst others return to some semblance of normality, we think that the remote working movement will be here to stay (particularly, if there are flare-ups like there have been in my suburb of Avalon!). From our teams experience, remote working has been great for most of us, offering a more balanced existence and we believe many companies like us, will choose to continue with remote working for a while yet, which we see as a driver of change for software-as-a-service solutions, like AML Accelerate, that empower employees to collaborate remotely and make it easier to manage day-to-day risk and compliance activities using purpose and expert built technology solutions.

Financial crime threats will continue to evolve

COVID has also driven massive behavioural changes among customers in terms of their attitudes to adopting different products and services like digital payments and virtual currencies, so we should expect that organised criminal networks will be changing their behaviours too and are no doubt, scheming up more ways to exploit loopholes in new and emerging technologies, particularly as is the case with digital currencies, where regulators are still working through their regulatory approaches.

Technology solutions will continue to improve

The RegTech market and ecosystem is going from strength-to-strength and is set to continue, as more early-adopters pilot and start using technology solutions to help manage financial crime and compliance activities. Technology vendors like Arctic Intelligence are rapidly innovating and improving their solutions and maturity of their platforms and market offerings. As underlying technology capabilities like AI and machine-learning are trusted and mature we expect this to continue to accelerate with strong potential for market consolidation and tie-ups/roll-ups between complimentary players, that solve more of the problems financial institutions and other sectors are facing.

Financial crime laws and enforcement activities will continue to tighten

Over recent months we have also seen countries like the USA, fresh off the embarrassing FinCEN file leaks, accelerating the introduction of the new Anti-Money Laundering Act of 2020 (AMLA*), filed as an amendment to the National Defense Authorisation Act for 2021, which amounts to the most significant overhaul of the legislation in 20 years and an action plan published by the European Union for preventing money laundering and terrorism financing..

We have even seen renewed calls by the Australian Greens to push the long-awaited Tranche 2 (hard) reforms in Australia, but sadly for the victims of financial crime, the Labour and Liberal parties still do not seem to have the necessary political will or motivation to make this a reality and this speech makes for some interesting reading.

This is in-spite of clear evidence of money laundering through these sectors, highlighted again today, with one of the major Australian law firms changing trust beneficiary details to family members rather than a disgraced Chinese billionaire that the ATO is after (nothing to see here clearly!).

We have also seen recent calls for concern by AUSTRAC CEO, Nicole Rose for failure of the Australian Government to act but judging by their track record on climate change this still seems far from resolved, 14 years on from when the laws were promised.

And last but no means least, the one on my Christmas list…

Banks and consultants will finally realise that excel is a really bad tool for conducting enterprise-wide risk assessments!

For years, banks and major consulting firms have been conducting enterprise-wide risk assessments using excel spreadsheets, which if you read my blog 18 months ago you’d know why I think this is not a great idea, so in 2021, we expect to see a maturity in how these are conducted by banks and consulting firms using actual technology and an increase in regulatory expectations to do so.

This year, our team has been engaged in many pilots of Arctic’s Risk Assessment Platform and have worked closely with many banks and consultants to migrate their excel based risk and control models into Arctic’s platform, which then facilitates a layer of configuration, user and data security, workflow, audit trail and analytics and provides an efficient process to rolling these out across larger organisations.

We have also commenced a global rollout with one of our major consulting clients which we believe will set them head and shoulders apart when conducting enterprise-wide risk assessment engagements with their clients and could trigger a realisation in how technology can augment their risk advisory practices and drive their banking clients to ask more of them.

Merry Christmas and Happy New Year

Finally, I would like to take this opportunity to sincerely thank our amazing team, clients, partners, investors and supporters for helping us survive the ups and downs of this year and I wish you a merry Christmas and safe return in the new year.

Thanks