Key Takeaways from the ACAMS AML Conference

Miguel Simões: I’m Miguel Simões and this is your Weekly Feedzai Update. 

I’m going to be talking about the ACAMS 21st Annual AML and Anti-Financial Crime Conference, which took place in Las Vegas and share some of the key topics and challenges we learned. 

The State of Sanctions and Oligarchs

Building and implementing a robust sanctions and AML compliance program continues to be a top priority. The role that sanctions played in Russia’s invasion of Ukraine was one of the key topics discussed. 

Since February, there has been a focus on using economic tools, such as the Office of Foreign Assets Control (OFAC)’s sanctions authorities, to drive the war into a strategic failure for Russia. OFAC has issued over 1,200 new sanctions listings targeting military figures, state-owned enterprises, individuals connected to the Russian regime, and oligarchs. These sanctions are having real results. We’ve seen their impact on Russia’s economy and military capabilities, degrading it and impacting the nation’s supply chain. 

In summary, there was an urge to ensure that compliance programs are effective and up-to-date and for financial institutions to be proactive. But oligarchs are not specifically Russian or Ukrainian nationals. They can be of any nationality. When we say “oligarch,” we are talking about someone that obtained their wealth from government support so that they can be used as a tool for soft power. 

In the end, more flexibility and quality is required when it comes down to sanctions. 

Violations of the Bank Secrecy Act

It is critical to ensure compliance with sanctions and other laws designed to protect national security and combat illicit finance. All companies, regardless of size or maturity, must remain compliant. 

In October, we heard directly from Brian Nelson, Under Secretary for Terrorism and Financial Intelligence. He said that a U.S. virtual assets service provider received a fine from both OFAC and Financial Crimes Enforcement Network (FinCEN). This was for willful violations of multiple sanctions programs, failing to comply with the Bank Secrecy Act (BSA), and failing to comply with suspicious activity reporting (SAR) requirements. These are not things that can be put on hold for growth. 

Beneficial Ownership Reporting

Corruption is a national threat, and curbing illicit finance is the key to stopping it. Due to gaps in AML and corruption frameworks, illicit actors, including oligarchs and drug lords, can continue to conceal their identities and launder their money through the U.S. and international financial systems. 

In September, FinCEN issued the final rule on ultimate beneficial ownership (UBO) information reporting, pursuant to the Corporate Transparency Act. This will help stop illicit actors from using anonymous shell companies to hide their identities and conceal their dirty funds. The rule will become effective on January 1, 2024. FinCEN is currently building a database to store this data and defining processes and guardrails to ensure that institutions can access it. 

The Rise of pKYC 

Another key topic discussed was perpetual KYC (pKYC). Although there is already some awareness of this topic, the majority of financial institutions still rely on the traditional KYC models. pKYC is a practice, not a process. It is a practice of maintaining accurate client data through updates of clients’ behaviors or circumstances. 

In contrast with cycles of remediation, pKYC is continuous, and it encompasses the entire lifecycle of the customer in the organization, collecting all relevant information in a single location. It enables financial institutions to move from periodic risk reviews to perpetual, continuous risk reviews of customers. It is also a big step forward in detecting suspicious behaviors, as customers are monitored in a continuous way. 

Some of pKYC’s key benefits are effective risk management, operational efficiency, and an improved customer experience. But there are also some challenges. Software has to be implemented. There needs to be a clear list of all of the data that is required in the customer lifecycle. There may be data quality issues. And there needs to be a full understanding of the concept so that it can be explained to regulators and internally to the institution. It is also expected that there will be a change in human resources needs, as reviews will be more focused on high-risk customers with more demanding investigations. 

If you want to hear more about the ACAMS conference or any other topic related to Feedzai, please reach out to me. I’m Michael Simões, and this was your Weekly Feedzai Update.

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