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Written by Jackie Whiting
on March 31, 2022

We’ve arrived at the end of another busy, and historic, month at kompany. In case you missed our big announcement, kompany officially joined the Moody’s Analytics family on March 1st, 2022. We wrote all about this new chapter of our story in a blog post published earlier this month, which we’ve linked to here. And while our clients and partners will continue to be served in the same and dedicated way as before, we are also looking forward to unlocking a new era of AML services with the support of the world-renowned team at Moody’s Analytics.

But before we begin recapping a few of March’s most notable news stories, we'd like to share are a few more things you may have missed:

Earlier this month we sat down with a few different leaders in RegTech to collect their best advice for women building their own careers in our ever evolving industry. You can read what they had to say here.

And at the end of February, Nicola Cowburn, guest blogger at RegTech Women, had a conversation with our COO Johanna Konrad about the current trends and opportunities in the industry, her specific role in the space and the one thing she thinks would make the world of RegTech a better place. Read the interview here.

Finally, we can recommend queueing up the following podcasts:

  1. UBOs and why they matter; this episode of KYC Decoded is all about the importance of dismantling corporate ownership secrecy: Listen on Moody's 
  2. The conclusion of the Dark Money Files trilogy continues its deep dive into trade-based money laundering and trade finance: Listen on Spotify
  3. The latest episode of AML Talkshow from our partner RiskScreen brings together host Stephan Platt and one of the UK’s leading anti-financial crime lawyer, Ruth Pale for an insightful conversation covering her career and predictions for the future of the FCA: Listen on RiskScreen 

And now let’s get started with the March edition of our RegTech Roundup! This month, we cover the cost of AML failings for banks, the new financial crime and anti-corruption centre INTERPOL is launching and the outcome of Estonia’s AML program. Let’s get on with it!

Share price and reputational damage: banks count cost of AML failings -  Global Trade Review (GTR)

The Global Trade Review (GTR) recently reported on the cost of money laundering for banks - beyond the upfront cost of non-compliance fines. “Banks caught up in money laundering scandals suffer an average 21% slump in their share price, researchers say, as warnings grow over regulatory scrutiny of the trade finance sector.”

According to a recent study by Themis, a financial crime intelligence provider based in London, the damage to banks found guilty of failures in their money laundering protections can go way beyond the cost of initial fines.

Seven banks involved in international AML scandals since 2019 experienced an average share price loss of just over 5% the day after regulatory action was announced. The drop in share price ballooned to 20.7% over the following six months. 

Senior management teams can also find their positions at risk as these AML failings can reduce “their chances of re-election by shareholders who have seen the value of their investments plummet”. This is of course, in addition to the criminal charges such individuals can face. 

GTR highlights an example from Themis’ report that puts Danske Bank in the hot seat. The Copenhagen based lender was caught up in an AML scandal back in 2019, specifically accused by Danish authorities of having applied “insufficient controls to transactions worth over €200bn through its Estonian branch between 2007 and 2015.” Eventually Danske would report a 36% decline in its first-quarter net profit in 2019. The report found similar outcomes for six other banks. 

But what can be done to avoid AML failures from the very start?

The Themis report recommends that “firms carry out thorough due diligence across their entire supply chains, arguing that doing so will boost their reputation for good practice among stakeholders, as well as reduce their risk of exposure to illicit activity.” They also push for the embrace of technology as an effective tool for understanding the relationships between individuals and entities, identifying corporate structures and improving the verification of official documents. 

INTERPOL Launches Financial Crime and Anti-Corruption Center - HS Today

The International Criminal Police Organization, INTERPOL, has launched its Financial Crime and Anti-Corruption Centre (IFCACC) in order to respond to the growing threat of transnational financial crime.  

INTERPOL member countries recently reported that “financial crime and corruption were among the top three threats they currently face.” The ongoing COVID-19 pandemic has served as a startling demonstration of how quickly and efficiently criminals are able to adapt their methods to take advantage of new opportunities for defrauding both individuals and companies. 

Secretary General Jürgen Stock of INTERPOL explains that the new crime center will focus on “centralizing the international response to transnational financial crime and corruption” by working closely with key stakeholders from FATF and FATF-Style Regional Bodies, law enforcement agencies, the financial sector and other relevant organizations and industries. The center will also work on improving a country's ability to intercept and freeze the transfer of illicit funds - a current weak point in many jurisdictions according to this report from Homeland Security Today, “It is estimated that less than 1 percent of criminal funds flowing through the international financial system are currently intercepted by law enforcement.”

Managing the movement of virtual assets, like cryptocurrencies, will also be a priority for IFCACC. "'Whether it’s corruption or financial crime, the criminal business model remains the same: bad actors, motivated by money and operating on a global level,' said Rory Corcoran, Acting Director of IFCACC.”

Estonian AML pilot shows what's possible when tackling FinCrime - Finextra

Finextra is sharing details on a recent Estonian AML pilot program that has been celebrated as a success by its first batch of participants. A group of ten Estonian banks participated in the pilot, known as “AML Bridge”, which saw them join together through a “secure FiNCrime intelligence sharing platform” in order to find more effective ways to tackle the country’s financial crime problems. 

According to Finextra, up to €3m have been prevented from reaching the hands of criminals. Participating banks also saw many of their AML and fraud cases resolved in as little as three minutes, with an average resolution rate of 15 minutes. 

The biggest wins have come from streamlining the exchange of information between banks, which enabled the pilot’s participants to identify fraud and money laundering attempts quicker than before. Now the banks who joined the pilot are discussing the next steps, namely the possibility of including more financial and non-financial institutions in the platform, and even the Estonian regulator, the Financial Intelligence Unit.  The co-founder of Salv, Taavi Tamkivi, (also the leader of the pilot program) explained that global regulators have also been interested to learn about the experiences of AML Bridge. 

AML Bridge is planned to expand into Poland, Sweden and Germany throughout the first quarter of 2022. The Estonian RegTech behind the pilot program, Salv, is also in discussions with other “tech-minded financial hubs” around the world - such as in Singapore and UAE - who are hoping to improve their fight against financial crime. 

And to conclude the story, Finextra reported that the AML Bridge’s stakeholders have been included in the latest Financial Action Task Force study, with their experience planned to be included in the FATF Stocktake on Data Pooling and Collaborative Analytics. Tamkivi remains optimistic for the future, saying that “This experience sharing will help FATF to pull together their upcoming new recommendations on industry wide collaboration and intelligence sharing…”

That's it for this month! But before you go…

Never miss important news from us again by subscribing to our newsletter and we’ll keep you informed each and every month. And if you enjoyed the read, follow us on LinkedIn and Twitter! You’ll receive next month’s news round up and stay informed on the latest happenings in all things RegTech, compliance and regulatory news.

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