The growing complexity of financial crime and the global demand for accountability and transparency are driving an increased need for strict AML controls within wealth management businesses, fund distributors, and asset servicers. Napier AI, a cutting-edge compliance platform, has provided answers to four of the most important queries on this topic.

1. Which regulatory systems in the industry address compliance with financial crime?

In a recent message outlining expected standards for financial crime and consumer duty within organizations, the Financial Conduct Authority (FCA) of the UK emphasized that the wealth and asset management sector is particularly vulnerable to financial crimes.

The FCA has observed the sizeable customer base in this industry, which consists of 14.3 million stockbroking accounts and 1.8 million portfolios, as it expands its oversight to be more proactive, innovative, and data-driven. One big problem is that a lot of businesses still rely on antiquated, siloed procedures that don't give them a clear picture of the dangers associated with their customers and the possibility of financial crimes. A considerable push is being made on these companies to enhance their financial crime compliance efforts in light of these challenges, with the goal of lowering risks, raising operational standards, and improving the industry's reputation overall.

Investment advisers may soon be subject to more stringent Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) rules thanks to the efforts of the Financial Crimes Enforcement Network (FinCEN) in the United States. This action is a result of an evaluation of the industry's exposure to illicit financial operations, which also suggests that investment advisers submit Suspicious Activity Reports, build an AML/CTF framework, and improve information exchange with other financial institutions and law enforcement.

To maintain transparency and compliance in the financial sector, the Australian Transaction Reports and Analysis Centre (AUSTRAC) provides comprehensive guidelines for conducting Enhanced Due Diligence (EDD) in Australia. These guidelines center on accurately identifying and comprehending the sources of funds and wealth.

2. How can one determine whether current AML compliance systems are malfunctioning?

Although familiarity and perceived cost-efficiency initially made outdated AML compliance systems appealing, they might have hidden costs that negatively impact an organization's financial stability.

Among other problems, operational inefficiencies highlight these hidden costs. Finding the ideal balance between building internal solutions and procuring third-party software is essential to have a financial crime compliance system that satisfies legal requirements, grows with the company, and is future-proof.

Among the warning signs that your current system is inadequate are:

• reduction in client satisfaction as a result of drawn-out onboarding procedures, delayed monitoring, and incomplete KYC verifications;
• analysts who have to find workarounds because to an excessive amount of false alarms and lengthy manual review timeframes;
• greater focus from regulators and sanctions for noncompliance linked to inefficiencies in the system;
• costly and time-consuming renovations and maintenance that add to inefficiencies in operations;
• challenges integrating with new platforms or technologies, which results in additional expenses to properly link these systems.

3. How might artificial intelligence (AI) aid enhance compliance?

The capacity of artificial intelligence (AI) to probabilistically recognize patterns and highlight anomalous behaviors makes it the best instrument for identifying suspicious activity and irregularities in screening and monitoring systems.

By utilizing advanced machine learning algorithms, artificial intelligence (AI) can quickly analyze large datasets, identify unusual trends, and identify possible financial crimes. This capability reduces the need for manual evaluations, speeds up the identification of suspicious transactions, and encourages a quick response to new threats.

Artificial intelligence (AI) expedites the identification of anomalies, supporting a company's attempts to prevent financial crimes while also greatly increasing operational efficiency. While adhering to regulatory requirements, this efficiency enables a more focused deployment of resources toward high-priority risk areas.

Napier AI offers a complete 12-step guide with professional advice and detailed checklists from top data scientists to ensure data integrity for using AI in financial crime compliance.

4. How can asset and wealth managers improve customer satisfaction and allay worries about client privacy?

The ability of asset and wealth management organizations to cultivate good relationships with clients and external partners is critical to their success, which makes the integration of efficient screening and monitoring frameworks challenging. Despite the explicit directives issued by regulatory organizations, the careful implementation of due diligence is frequently impeded by worries about straining these important connections.

Retaining openness in Know Your Customer (KYC) procedures is essential to protecting a company's brand. These companies must make use of outside data sources, such as lists of politically exposed persons (PEPs), beneficiary ownership, sanctions, and negative media coverage, in order to enhance customer profiles and guarantee thorough oversight throughout all of their distribution channels.

Customer satisfaction is greatly increased by these companies' ability to offer their financial products and services with agility. It does, however, provide significant difficulties for maintaining anti-money laundering (AML) compliance, when slowing down operations is not the solution. Excessive disruptions to the client journey for compliance verification run the risk of driving away prospective customers. Using data from external parties to enhance client information promotes transparency and ensures thorough due diligence. By doing away with the possibility of oversight and streamlining the client experience, this approach frees investors from having to submit the same documents in many jurisdictions.

As criminal techniques change, wealth and asset management companies can reduce criminal activity and use compliance as a competitive advantage by taking an innovative approach to financial crime compliance, turning it from a regulatory duty to a strategic asset.