In Industry Insights, Industry Insights

Anti Money Laundering (AML) Regulations are here to stay so the smart money is on automating the process so your business remains compliant and stands up to scrutiny with the minimal effort and cost.

The changes are not major in the new MLD4 but they do make life somewhat more challenging if you don’t already use an electronic AML verification solution.  The new directive was published in the official European Journal on 26th June 2015 and here are a few of the more obvious changes we will have to comply with.

  • MLD4 remains a “risk based approach” the rules around Customer Due Diligence (CDD) and Know Your Customer (KYC) remain unchanged, the scope and coverage of the Regulations has been expanded.
  • Politically Exposed Persons (PEPs) has now been extended to include domestic PEPs, previously firms only needed to check PEPs outside the UK.
  • The definition of PEPs has also been extended to cover Directors, Beneficial Owners and Senior People in International Organisations such as FIFA.
  • The period that PEPs are classified after leaving office has also been extended from the current 1 year to a new 18 months period.
  • The new Regulation now require regulated entities to screen all staff for AML purposes, it is unclear at this time if this means just new staff or existing staff. It is also unclear how rigorous these checks should be as there are no existing guidelines.

There will undoubtedly be additional changes as the UK Government implements this into their Statutes.

Many organisations have already switched to an electronic method of verifying customers to comply with AML regulations.  It’s simply not possible or cost effective to attempt to check Sanctions and PEPs manually when using paper ID documentation.  In the past some firms have continued to use paper ID documents and clung to the conviction that “their clients aren’t the type to be found on Sanction or PEP lists”.

The time has come to adopt technology to solve these problems, these days a number of systems will verify individuals in a matter of a few seconds without the need for any client ID documents and at the same time complete the Sanction & PEP checks required by both the current and new regulations.  These systems actually save you time and money and an awful lot of inconvenience for both you and your clients.

One such system is SmartSearch.  This organisation has taken the solution several steps further and provides a complete solution for both individual and business searches again without the need for any client ID documentation.  In addition, they provide daily monitoring of both Sanction and PEP changes and apply these to your existing customers ensuring you are alerted to any change in their status.  A full individual check with Sanction and PEPs takes around 3-5 seconds and a full business check takes a little longer at circa 3 minutes so you can see major time and cost savings.

On the occasions when a Sanction or PEP match occurs with a new or existing customer, they provide biography, adverse media and photographic evidence to enable you to complete enhanced due diligence in a matter of 1 or 2 minutes.

With the entry price for such a system being a few hundred pounds per annum, can you afford not to employ one of these efficient and cost effective electronic systems to keep you and your firm fully compliant at all times.

The current SmartSearch system is already configured to comply with the new directive, so if you want to minimise your effort and cost of complying with the MLD4 changes, it’s worth taking a look at SmartSearch.


John Dobson FIoD

CEO at SmartSearch

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