The commencement of anti-money laundering (AML) requirements for financial institutions issued in May 2018 has caused increasing numbers of firms to shift their hiring and focus of compliance staff toward more efficient customer due diligence (CDD) practices, rather than addressing and managing regulatory change.

That’s one of several key takeaways from the 2018 Thomson Reuters U.S. Anti-Money Laundering Insights Report. The report, compiled with the Association of Certified Anti-Money Laundering Specialists (ACAMS), provides data to how financial institutions are addressing these challenges in the current environment.

The certainty provided by the Financial Crimes Enforcement Network’s (FinCEN) CDD Rule already has had – and will continue to have – a dramatic impact upon the operations and practices of firms as the survey found 28 percent of respondents anticipate an increase in staffing for AML compliance purposes, a large rise compared to 8 percent in 2017. This focus has led to fewer CDD or AML regulatory enforcement with 22 percent of organizations experiencing regulatory action, down from 31 percent in 2017.

“Developing customer risk ratings is a key component of the CDD Rule,” said Chris Maguire, managing director, Corporate Legal at Thomson Reuters. “The most commonly used factors to develop the risk rating were customer activity, geographic location and political exposure, with politically exposed person being the top standard measure of risk as it was in the 2017 report. And organizations have improved their collection and speed gathering the necessary information.”

Key details institutions need from customers to meeting the CDD Rule requirements also include occupation or nature of business, source of funds, identification of beneficial owners, purpose of account, and business formation documents. Operationally, respondents noted a key challenge is keeping information up to date, which increased slightly from 2017. A good sign for institutions is that the inability to validate information is less of a barrier (49%) than it was in 2017 (58%).

The CDD rule may continue to require substantial time and investment, but improving data management/data quality, investing in new technology/process automation and streamlining business processes also are areas of focus. For these additional areas, the biggest challenges are increased regulatory expectations, properly trained staff and outdated technology.

The 2018 Thomson Reuters U.S. Anti-Money Laundering Insights Report, which includes responses from 253 AML compliance leaders, analyzes these findings and more. The report provides professionals with a better understanding of the current state of the industry and their ability to use data to better make operational and budgetary decisions. Download the full report here.



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