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Written by Jackie Whiting
on September 30, 2021

September has come and gone which means it’s time for another edition of our monthly RegTech Roundup. Before we answer the question, “what happened in the world this month?” it’s time to catch up on the latest news at kompany.

kompany has made it onto the shortlist for the Insight Awards (USA) hosted by A-Team Insights. You can now vote for our KYC API to be recognised as the "Best Data Solution for KYC" in the United States. Voting only takes a minute and you have until Monday October 18th, 2021 to cast your ballot for kompany. 

You can also read the Planet Compliance interview, in which our CEO and Co-Founder Russell E. Perry, talks about what sets kompany apart from other RegTechs as well as important developments in the industry worth knowing. Read the interview by clicking here.

And did you know that kompany is a project member of a special European Union initiative known as GRIDS? The consortium group has set out to make it easier for businesses to operate across EU borders and wants to enable regulated and unregulated entities to identify B2B customers digitally through the eIDAS framework while remaining fully compliant with AML regulations. Curious to learn more? Watch this 4 minute video that explains the intentions of GRIDS, narrated by our General Counsel, Carina Wolf.

Finally, we’re also going to be appearing at Hong Kong FinTech Week this November. Get your ticket today and join us later this fall for an exciting panel discussion that will explore the ways RegTech can solve real-world problems and reduce financial crime. Learn more by visiting the event website.

Now let’s get on to this month’s news stories in which we evaluate the potential economic impact of getting greylisted by the FATF, where the global community falls short in preventing money laundering and how human trafficking remains a serious money laundering concern for financial institutions.

24 companies renounced Malta licence after greylisting (Times of Malta)

Following years of criticism for deficiencies in its anti-money laundering regimes, Malta was placed on FATF’s greylist earlier this summer. Many in the country were left understandably concerned about what kind of impact this might have on Malta’s economic growth and some are claiming that the effects are now being felt.

“Some 24 companies have renounced their licences to operate in Malta since the country was greylisted by the Financial Action Task Force, compounding uncertainty in the financial services industry, the Nationalist Party said on Monday.”

As a reminder, jurisdictions placed on the FATF’s greylist mean they must face increased monitoring from the global watchdog and implement a certain level of reform in order to be removed from the list, with strict time frames agreed on by both parties. If such improvements are not achieved, there is always the possibility of receiving the worst designation, being blacklisted. Blacklisted countries are considered to have such serious deficiencies that the international financial system is asked to apply “strict counter-measures” to them, which essentially serves as a discouragement to do business with these countries altogether. Currently, only North Korea and Iran are currently on the FATF blacklist.

But in the case of Matla, there’s time to turn things around and in fact, the country has been acknowledged for making progress in its anti-money laundering efforts - though not enough to avoid its greylist status. Now political parties within the country are at odds of what to do next.

The Nationalist Party claims that businesses are paying a steep price while “the government has not been convincing that it has a plan to get out of greylisting and if it does, it has not effectively communicated those plans..."

Noting that some companies which had given up their licence had been operating in Malta for 15 years, Nationalist MP Kristy Debono said the current situation has left the financial service industry at a crossroads. However, the Labour Party has dismissed the matter as “half-hearted spin” and claims it’s completely normal “for a number of operators to relinquish their license.”

Either way, the reputational impacts will likely present themselves definitively - one way or the other - for as long as Malta remains on the greylist.

Corruption trackers flag increased global money laundering risks (SwissInfo)

“The 10th edition of the Basel AML Index report stresses that a stronger response is needed to the threats arising from virtual assets (cryptocurrencies) and greater emphasis on prevention of money laundering and terrorism finance (not just enforcement).”

The report creates a snapshot of the global efforts to combat money laundering and terrorist finance, finding that “ineffective systems are the general rule” and that countries are consistently performing worse when it comes to prevention than enforcement.

Also highlighted in the report is the “ineffective implementation of beneficial ownership transparency registers around the world” as many jurisdictions continue to struggle with the identification of ultimate beneficial owners despite increasingly strict requirements to do so.

“Other areas of concern include the weak application of preventive measures outside the financial sector (for example, business sectors such as real estate) and the role of intermediaries, including lawyers and accountants, who can be exploited by criminal actors.”

Also alarmingly is that the global risk score has increased from 5.22 to 5.3 out of 10 (10 being the highest possible risk score). Risk scores are based on public data collated from 17 public sources including the Financial Action Task Force, Transparency International, the World Bank and the World Economic Forum.

They are created by assessing country-specific legal frameworks on money laundering and terrorism financing, bribery and corruption risks, financial transparency, opportunities for public accountability, as well as legal and political risk factors.

Human Trafficking a Serious Money Laundering Concern for Financial Institutions (Lawyer Monthly)

According to the latest annual anti-money laundering study from BAE systems (The State of Anti-Money Laundering in 2021), human trafficking is one of the biggest concerns amongst compliance professionals across the globe.

As Lawyer Monthly explains, “over 75% of compliance professionals admit they are not confident that money laundering crimes linked to human trafficking could be stopped from passing through their customers’ accounts.”

The majority of study participants also expressed concern that new criminal techniques are becoming harder to identify, and nearly a third of those surveyed say that their teams struggled to “identify the key indicators linked to human trafficking.” One in five also claim that they don’t have enough anti-money laundering intelligence within their organisation.

Breaking it down by key regions, the costs of human trafficking are rampant around the world. In the United Kingdom, 25% of risk and compliance professionals within financial institutions said that “human trafficking was causing the largest financial losses of all anti-money laundering crimes". In the United States a third of professionals reported sharing these feelings and in Australia nearly 50%.

All in all, financial institutions have been loud and clear that many do not feel well enough supported to tackle the problems at hand. Nearly a third are requesting more shared industry knowledge in order to better tackle money laundering challenges.

The adoption of technology will also play an important function in overcoming current infrastructure and process challenges that are limiting compliance professionals to be as effective as possible in their roles. 

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

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