Anti-money laundering is a complicated issue, jeopardizing financial organizations and states. The fiscal mechanism has to operate with as few obstacles as possible.
Money laundering prevention exists to eradicate tax evasion, fraud, and other financial crimes. A proper implementation helps identify active cases and functions as a preventive measure at the same time.
Having said all that, the fight against money laundering is one of attrition.
Let’s take a look at some of the most pressing AML challenges.
1. Complicated technology.
Organizations are looking to solve modern problems with modern solutions. It’s natural to rely on technology.
Machine learning and artificial intelligence are the standout examples. Governments and individual companies collaborate with developers to come up with efficient solutions. However, since AML compliance is complicated, so are the processes and technologies involved in it.
Complexity and time consumption cause delays. For instance, when a business wishes to integrate a solution into its infrastructure. Thankfully, emerging technologies are making things simpler than before. From case management to screening, selecting the right developer can make things easier.
2. Lack of resources.
Some institutions lack sufficient data to prevent money laundering. Without realizing it, they are prone to fraudulent activities happening right under their noses. Suspicious activity identification should be one of the priorities, but if an organization lacks resources, it will become a perfect target for criminals.
The upside of this challenge is that the lack of resources is not as bad as it was before.
Various AML tools are becoming more available, and implementing even the basic solutions shouldn’t present too many difficulties. At the end of the day, it’s up to the organization to take the necessary step and equip itself with the means to detect and stop money laundering.
3. Not enough skilled personnel.
Fighting money laundering with outdated methods is hardly efficient. As mentioned already, organizations are looking to implement modern solutions. The implementation comes with the obstacle of overcoming the lack of skilled personnel. The demand for qualified professionals is high. Some institutions can’t offer attractive salaries and other benefits to persuade potential newcomers.
One of the best ways to overcome this challenge is to train someone from within. Employees who have been with a company for some time will see this as an opportunity to advance their professional knowledge and career opportunities. An employer who provides such opportunities can expect a higher retention rate because the newly trained employees will feel obliged to show their loyalty.
4. New and complex money laundering methods.
Technologies solving the issue are not the only thing moving forward. Criminals have access to new money laundering methods as well. Cryptocurrency is one of the more recent examples. Due to its blockchain technology, some digital currencies are more or less impossible to track. Combine that with offshore accounts and shell companies, and you have a successful system that lets criminals run rampant.
Financial institutions are the ones chasing the tail of money launderers. The latter finds a new method, and the former looks for a solution to counter it. Approaching the problem proactively sounds like a good idea, but it doesn’t really work in practice. One cannot predict what the next big thing in money laundering schemes will be. Analyzing the market and looking for trends also works better on paper than in practice.
5. Poor cooperation between authorities and financial organizations.
Information sharing could be a significant leap in the right direction as far as money laundering prevention goes. Unfortunately, not all organizations are willing to cooperate.
For one, they want to keep the data exclusively for themselves.
Another reason behind it is the fear of data getting into the hands of corrupt officials or criminals themselves.
Given the significance of money laundering and how it’s not stopping, there’s been a push from different industries to be more open and cooperate with each other by sharing information.
6. National and international governance.
Managing compliance standards for some organizations is tricky because they have to consider both national and international legislation. Different jurisdictions have different methods to treat money laundering.
It’s difficult to imagine a world where countries or states can agree on the same regulations even though money laundering is a global problem. Considering the cultural and other differences, legislation homogenization is a far-fetched idea, so it’s up to the organizations to keep up with different regulations.