Financial Institutions are the backbone of the financial ecosystem, leading monetary circulation and facilitating payments globally. This helps businesses to expand their operations globally. However, there is a risk of exploitation of these services and their misuse for financial crimes. KYC/AML Consultant plays a key role in streamlining financial activities by upholding KYC and AML regulations. Let us know more about the KYC/AML Consultancy service and its role in financial institutions.
Understanding the Regulatory Framework for KYC/AML
Both Global and Local compliance requirements are important for financial service providers. For example, a money service business (MSB) is required to follow the guidelines of regulatory bodies within its home country and the jurisdictions in which it operates. The following are the main regulators of financial institutions around the world:
Financial Action Task Force (FATF)
- Founding Year 1989
- FATF is an intergovernmental organization setting global standards to combat money laundering, terrorist financing, and threats to the international financial system.
Office of Foreign Assets Control (OFAC)
- Founding Year 1950
- It is a unit within the U.S. Department of the Treasury, that enforces economic sanctions against targeted entities to protect U.S. national security, foreign policy, and the economy.
Financial Crimes Enforcement Network (FinCEN)
- Founding Year 1990
- It is a U.S. Treasury bureau primarily focused on safeguarding the financial system by combating money laundering, analyzing financial intelligence, and promoting national security.
European Banking Authority (EBA)
- Founding Year 2011
- This EU authority ensures consistent prudential regulation across the European banking sector, with a role in anti-money laundering (AML) regulation within the EU.
Prudential Regulation Authority (PRA)
- Founding Year 2013
- It oversees prudential regulation for banks, insurers, and investment firms.
Financial Conduct Authority (FCA)
- Founding Year 2013
- It is focused on conducting regulation and ensuring fair and transparent markets in the UK.
Australian Transaction Reports and Analysis Centre (AUSTRAC)
- Founding Year 1989
- It is Australia’s financial intelligence agency and regulatory body for AML and counter-terrorism financing, actively contributing to the administration of justice through intelligence sharing.
Ever-Evolving Regulatory Landscape
The above-mentioned regulators of financial services are just a peek at the bigger picture. Every progressing nation that seeks financial stability is now stressing the notion of having a strong grip on financial institutions to mitigate money laundering threats.
Other countries have:
- Canada has: the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
- China has: People’s Bank of China (PBOC)
- UAE has: The Financial Services Regulatory Authority (FSRA)
KYC/AML Consultant provides extensive knowledge and guidelines to the financial service providers to stay regulated with these regulatory bodies. Since KYC Solutions carries out the customer onboarding and ensures identity verification as a fortress against fraudulent Identities, a consultancy must be hired to prevent any discrepancies in the KYC System.
Risk Mitigation Strategies
Financial Institutions have some inherent risks such as:
- Money Laundering
- Fraud
- Identity Theft
- Terrorism Financing
- Risk of penalties and fines due to non-compliance
How KYC/AML Consultants Mitigate these Risks
A Consultancy for KYC and AML plays a connecting role between financial institutions and the KYC Solution Providers. It also guides the fintech businesses towards streamlining their financial activities and aligning them with the latest regulatory updates. An ideal KYC/AML Consultant has both enlisted top KYC solutions and industry-level expertise to guide the fintech in making the right decisions without disrupting their business activities. Following are the risk mitigation strategies that Consultants suggest to mitigate the financial crime risks.
- Technological Integration for Enhanced Security that leverages Biometrics, AI, and other emerging technologies to automate and enhance the overall KYC/AML process.
- Educating and Empowering Staff with the latest KYC AML Tools is imperative. Consultants help the in-house teams and other employees of Financial institutions to learn and embrace the importance of KYC AML Compliance.
- Tailored Solutions for unique institutional needs is another key strategy to mitigate financial risks. Since FIs are of different scopes and business natures, they need the best-suited KYC tool according to their budget and compliance requirements.
KYC AML Guide as a Consultancy
KYC AML Guide is primarily a Technology Buying Consultancy and it offers financial institutions the industry-level guidelines to select the best-suited KYC Tool. These guidelines are based on robust Vendor Analysis and well-researched content.
Conclusion
KYC/AML Consultants play an active role in streamlining the regulatory compliance for financial institutions. They keep the fintech businesses aligned with the latest regulatory updates and maintain their KYC Tools performances up to the mark. Financial Institutions must consider hiring a KYC AML Consultant to achieve compliance excellence and deliver a seamless User experience in their customer Onboarding process.