How GRC Can Improve Compliance with AML Regulations

  • April 27, 2021
  • Quantivate

Anti-money laundering (AML) has been an important aspect of compliance activities and processes in the financial services industry for over a century. As the global financial system has grown more sophisticated and complex, AML has become significantly more important. This increased importance has made complying with AML regulations a critical element of governance, risk, and compliance (GRC) management for financial institutions.

AML enforcement and fines for failing to apply and/or maintain proper controls have been increasing, and it is of the utmost importance for organizations to implement a framework and technology architecture that can sufficiently support compliance enterprise-wide.

Leveraging GRC tools and processes in your anti-money laundering program is not only a matter of compliance but also impacts your institution’s bottom line. AML compliance penalties are often very hefty—nearly half a billion USD in some cases—and carry reputational risk. Although penalties that large are not the average, it is fairly common for fines to reach the eight- to nine-figure range. 

5 GRC Processes That Support Compliance With AML Regulations

Implementing a GRC framework helps financial institutions:

  • Apply proper governance protocols and implement policies throughout the organization, including employee training and clearly defined and mapped processes integrated into the business.
  • Identify emerging and potential risks scattered throughout the extended enterprise. Institutions need complete visibility and holistic awareness of emerging risks related to AML to assess their potential impact. Once that framework is in place, it’s easier for your organization to take the necessary steps to mitigate that risk and report to all relevant stakeholders.
  • Monitor and provide assurance for policies and controls with constancy and consistency throughout the entire organization.
  • Analyze customer risk, KYC (know your customer), and EDD (enhanced due diligence) data, as well as trends and external data. Incorporating this type of information into your management framework gives you an edge in fighting money laundering activities and helps your institution remain compliant.
  • Report on AML initiatives and incidents internally and to meet regulatory requirements. Effective, accurate documentation requires a technology architecture that offers advanced reporting capabilities so your organization can meet compliance requirements.

Financial institutions are confronting a serious challenge in fighting money laundering activities. Regulatory bodies have instituted a bevy of different requirements and procedures to assist organizations in preventing and detecting such nefarious activities. To remain compliant with AML regulations, organizations need to build an integrated risk and compliance framework. Implementing GRC processes supported by a flexible technology solution equips institutions with the tools and data they need to make informed risk management decisions and keep pace with regulatory change.