Just today, the Confederation of British Industry said that the UK needs to come up with simpler and easier AML/CFT regulations or British business will suffer. CBI boss, John Cridland, says that Britian will not meet its 2020 goal of 1 trillion pounds in exports because of current anti-money laundering (AML) requirements.
The CBI’s position is a blatant and crude display of the most longstanding problem for the compliance function: compromising to revenue interests. In August 2014, FinCEN published a series of guidelines (PDF) regarding effective compliance of financial institutions. One would hope that in the U.K. the FCA is issuing similar advice. The second item in the FinCEN list is titled Compliance Should Not Be Compromised By Revenue Interests and it reads in part:
Compliance staff should be empowered with sufficient authority and autonomy to implement an institution’s AML program. An institution’s interest in revenue should not compromise efforts to effectively manage and mitigate BSA/AML deficiencies and risks, including submission of appropriate and accurate reports to FinCEN. An effective governance structure should allow for the BSA/AML compliance function to work independently and to take any appropriate actions to address and mitigate any risks that may arise from an institution’s business line and to file any necessary reports, such as Suspicious Activity Reports (SARs).
Giving the regulator the benefit of doubt, if AML could be simpler without being less effective, it probably would be. The regulations and guidelines are fairly clear and flexible. The problem may actually not be with them. Bank aversion to risk and to regulatory sanction may be driving the problem. The problem may be in how banks and financial professionals have implemented their processes and the tools they have selected in doing so. Client on-boarding and transaction monitoring are difficult to get right 100% of the time and can be very annoying when they go wrong. Part of the solution is to provide business development and customer facing employees access to self-service KYC tools so that they can do a “sanity check” of any new client right on the spot and business can continue uninterrupted. Customers never like “waiting for compliance”.
While anti-money laundering and counter terror finance controls are often an inconvenience, the potential gain in business may not outweigh the cost to society of invasive corruption, crime and terrorist funding that would follow relaxing KYC/AML regulations.