Why knowing your customer could save you from a big fine!

According to a recent article by the FT, global regulators are continuing to fine companies for anti-money laundering failings at a high rate, particularly in the UK and EU, as watchdogs pile pressure on the financial industry to stiffen its defences against crime.  

Kroll, the governance and risk consultancy, found in its latest review that authorities levied almost $1bn ($994m) of AML fines in 17 big actions during the first six months of 2021. That is on track to match the surge to $2.2bn in 2020, up fivefold from $444m in 2019.  

Investigations were not paused for Covid-19 and the value of fines has surged as regulators impose tougher penalties, continuing to send the message that despite any obstacles, enforcement remains a top priority. 

As has consistently been the case since the study started in 2016, the fines mainly relate to shortcomings in AML management, inadequate suspicious activity monitoring and customer due diligence.  

As a result, regulators are resorting to harsher punishments and even criminal proceedings for those it deems to have fallen short. For instance, in March, the Financial Conduct Authority launched its first attempted prosecution for AML failings against NatWest, which failed to properly monitor the actions of a Bradford-based gold dealer. Courts can impose unlimited fines in criminal money laundering cases. This is the first time the FCA has exercised its criminal powers. 

Another notable probe includes Monzo, the start-up digital lender, over potential breaches of AML laws. These issues are symptomatic of growing firms, whose compliance and “know your customer” processes are often not able to keep up with the pace of customer acquisition.  

As this latest report indicates it is vital that organisations get to grips with Know Your Customer regulations in order to avoid future AML fines. One area that we can help with is in the reduction of deceased identity fraud. Our product Halo, which is KYC compliant, enables organisations to identify any fraudulent activity occurring using the personal information of people that have passed away. Deceased ID fraud is one of the fastest growing forms of fraud and as a result of the pandemic this is accelerating. Therefore, for firms experiencing rapid growth, such as Monzo, who are receiving hundreds of thousands of applications it is easy for fraudulent submissions to slip through the cracks. 

For more information about deceased identity fraud or our product Halo please don’t hesitate to get in touch.