Compliance requirements have spawned a multitude of regulatory texts, directives, laws and other decrees, accompanied by forms to fill in and processes to design and administer. They have also spawned an avalanche of acronyms, not all of which are easy to understand.
" PEP and their RCAs must be integrated into KYC as part of AML, especially if the BE are involved in AME ".
For an expert in the fight against money laundering and the financing of terrorism, this sentence may be crystal-clear, but for a novice it's not. As in many professions where jargon is the language of daily life, clarification is essential.
AML (Anti Money Laundering): the arsenal of compliance
AML brings together all the laws, regulations and processes designed to combat money laundering. According to the French Treasury, "the fight against money laundering has a twofold objective: to prevent criminal activitiesby depriving them of funds; and toensure the soundness, integrity and stability of the economic and financial system". This mission tackles three main risks: tax, social security and customs fraud, drugtraffickingandtheft andfraud.
Bleaching is a three-stage process:
- Investment, which involves injecting funds of criminal origin in the form of cash into economic and financial activities.
- Stacking, which involves converting, moving and dispersing funds in order to conceal their illegal origin.
- Integration, to reintroduce funds into legal economic activities.
Politically exposed personsPEP): prime targets
PEP are people who are considered "exposed to higher risks of money laundering or corruption", as defined by theACPR (Autorité de Contrôle Prudentiel et de Résolution). This category includes people who exercise administrative, political or jurisdictional functions, whether at local, national or international level, or who ceased to exercise such functions less than a year ago. Politically Exposed PersonsPEP) are designated as such because of their privileged access to public or private resources. By occupying strategic positions, they can potentially divert their influence to illicit ends, such as money laundering, corruption or the financing of terrorism.
In practical terms, this category imposes stricter vigilance obligations on financial establishments. This means that they are required to obtain more detailed information on the professional, family, financial and asset situation of the individuals concerned. In particular, these checks concern the origin of funds deposited in an account or life insurance policy, as well as the composition of assets.
RCA (Relative Close Associates): family and friends of friends are also potential targets
People referred to by the acronym RCA include those close to PEP , such as spouses, children and parents. They also include people closely associated with a company, legal entity or business, commercial or legal relationship, such as lawyers.
KYC (Know Your Customer): banishing ghost customers
The KYC approach consists of verifying the identity of customers prior to any commercial or financial relationship.
The focus is on three aspects:
- Customer identification, with the collection and verification of identity documents. - Customer profile and risk assessment, based on the customer's activities, financial situation and the origin of the funds involved in the transaction. - Continuous monitoring, with precise tracking of transactions to detect suspicious or unusual behavior.
AME (ADVERSE MEDIA ENTITIES): avoiding a bad reputation
Non-compliance by a company or organization can quickly become the subject of media coverage. In the age of social networks, fake news and a public increasingly attentive to exemplary corporate behavior, heightened vigilance is essential to prevent any regulatory or legal risk. This vigilance relies on rigorous and continuous monitoring of all media - including websites, blogs and social networks - to keep an eye on what is published about customers, partners and suppliers. Establishing or strengthening business relationships with entities perceived negatively by the media thus represents a major risk. But, according to the State of Adverse Media Screening, eight out of ten companies still rely on manual processes to manage this reputational risk, even though automation tools exist and artificial intelligence has already demonstrated its effectiveness in this field. Let's not forget that screening unfavorable media is an essential part of a company's Customer Due Diligence (CDD) procedures, on a par with other filters (sanctions, politically exposed persons).
These five acronyms perfectly illustrate the main principle of anti-money laundering: knowing exactly who you're dealing with (exposed and unexposed persons) and with whom a company or organization interacts, while staying within the bounds of regulations. In theory, it's simple: if you apply this principle to the letter, you stay in compliance. But in practice... it's a bit like assembling a piece of furniture without instructions: it looks easy, until you end up with excess parts and a leaning shelf!
Automation to guarantee compliance
A major challenge emerges: how to quickly and efficiently identify PEP and at-risk customers? It's impossible to imagine doing this manually. The volumes involved are too great, and updates would quickly become a headache. It's true that there are open sources and multiple databases, but they are of very uneven quality, as the French Anti-Corruption Agency points out, for whom "there is too much information and too many databases."
Automated management of compliance and watch lists is therefore essential, as supervisory authorities are always very vigilant about the frequency of updates to the various lists, whether national, international, private or intergovernmental. In the event of non-compliance, fines can be very high, and managers can be held criminally liable.
Equipping yourself with a specific solution guarantees 100% compliance. A solution such as AP Scan identifies sensitive personsPEP and RCA) on the basis of scoring rules that can be fully parameterized with fuzzy logic, traceability, augmented intelligence and data enrichment. KYC remediation is also essential, to clean up and update customer information.
The fight against money laundering and the financing of terrorism remains a question of optimized management of multiple data, transformed into information, which in turn is transformed into knowledge. Integrating these practices into automated processes will ensure regulatory compliance.
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