The Financial Action Task Force (FATF) is an intergovernmental body dedicated to combating global financial crime and promoting international anti-money laundering (AML) and counter-financing of terrorism (CFT) standards. Unlike centralised domestic AML/CFT authorities, the FATF also fights financial crime through its Global Network, which is made up of participants from across the world.
What is the FATF Global Network?
Developed to ensure that global criminal threats are met with a global response, the FATF Global Network serves to promote the consistent worldwide application of the FATF AML/CFT Recommendations and facilitate mutual evaluations of member states. While the FATF was created in 1989, the Global Network was effectively established in 2005 with the introduction of associate membership for FATF-Style Regional Bodies (FSRB). Today, the Global Network refers to the FATF and its 206 member jurisdictions, and its 9 FSRBs (along with various FATF observer members).
The relationship between the FATF and FSRBs is governed by the High Level Principles and Objectives, which also map the operational structure of the Global Network. The Principles also set out the obligations and expectations of Network participants, and their reciprocal rights. Since the introduction of FSRB associate membership, FSRBs have worked closely with the FATF to improve the functionality of the Global Network, develop global AML/CFT standards, conduct mutual evaluations of member states, and assess the implementation of the FATF Recommendations.
The Global Network currently comprises the following participants:
Financial Action Task Force: The FATF develops and sets global AML/CFT standards and conducts mutual evaluations of members to determine whether those standards have been implemented effectively. The FATF also identifies and designates high risk jurisdictions with significant AML/CFT deficiencies. The FATF works with FSRBs in the pursuit of its global AML/CFT objectives.
APG: The Asia/Pacific Group on Money Laundering is an FSRB dedicated to ensuring the adoption, implementation, and enforcement of AML/CFT standards in APAC. APG members include the United States, Canada, China, India, Korea, Japan, Australia, and New Zealand.
CFATF: The Caribbean Financial Action Task Force is an FSRB committed to ensuring the implementation of FATF standards in the Caribbean basin. Member countries include Barbados, Bermuda, Jamaica, the Bahamas, Trinidad and Tobago, and Venezuela.
MONEYVAL: The Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) is an FSRB and monitoring body composed of 27 member states of the Council of Europe. State representatives of MONEYVAL are typically senior political, legal or law enforcement officials, and the organisation’s objectives include conducting mutual evaluations, peer reviews, and MER follow-ups.
ESAAMLG: The Eastern and Southern Africa Anti-Money Laundering Group is an FSRB for 20 African member states. Its objective is to ensure the adoption of FATF Recommendations across eastern and southern Africa.
EAG: The Eurasian Group comprises 9 eastern-European and Asian states, including Russia, India and China, and joined the FATF as an associate member in 2010. Like other FSRBs, the EAG works to promote the implementation of FATF AML/CFT Recommendations and facilitate mutual evaluations.
GAFILAT: The Financial Action Task Force of Latin America (GAFILAT) is an FSRB made up of 17 South American, Central American, North American countries, including Mexico, Colombia, Argentina, Chile and Brazil. It became an FATF associate member in 2006.
GABAC: The Central Africa Money Laundering Action Group (GAFILAT) is an African FSRB consisting of the central African countries of Cameroon, Congo, the Democratic Republic of Congo, Gabon, Equatorial Guinea, Gabon and Chad.
GIABA: Established in 2000, the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA) is an FSRB for West Africa, and a specialised part of the Economic Community of West African States (ECOWAS). GIABA member states include Ghana, Nigeria, Senegal and Mali.
MENAFATF: The Middle East and North Africa Financial Action Task Force is an FSRB committed to implementing the FATF’s Recommendations in the Middle East and North Africa. Its member states include Algeria, Bahrain, Egypt, Jordan, Morocco, Qatar, Saudi Arabia, and the United Arab Emirates.
The Global Network’s Strategic Vision
The function of FSRBs and their relationship with the FATF has evolved substantially since 2005, with the Global Network becoming more “cohesive and inter-related”. Given that progress, the FATF has stated that it aims to “more effectively leverage the expertise and work of the Global Network” by setting out a “strategic vision” to better facilitate its AML/CFT objectives and cooperation with FSRBs.
With that in mind, the FATF has set out the details of the strategic vision:
- The Global Network will serve to mobilise the political will of FATF and FSRB members, with the FATF acting as the global standard-setter, and FSRBs as regional experts.
- The Global Network will operate on principles of “inclusivity and collaboration” in order to ensure the consistent interpretation and application of FATF Recommendations, and to strengthen cohesion between members.
- Both the FATF and FSRBs will have adequate resources, expertise, and institutional structure needed to operate effectively, with commitment to FATF standards and mutual evaluation work. The Global Network will drive improvement in the implementation of FATF Recommendations.
- The Global Network will identify common priorities in order to mitigate global financial crime threats and identify weaknesses in FATF recommendations.
- FSRBs will focus on understanding regional AML/CFT risks, challenges, and needs, while the FATF will focus on understanding global AML/CFT risks, and the appropriate responses to them, while taking regional considerations into account.
- The Global Network will promote a common global understanding of FATF Recommendations and how to implement them effectively. Meanwhile, the FATF will support and strengthen the Global Network in this capacity in order to ensure consistency in global understanding of the Recommendations.
FATF Annual Report 2021-22
The strategic vision is subject to periodic review so that the Global Network can adapt to developments on the AML/CFT risk landscape. In its Annual Report 2021-22, the FATF set out the ways in which the Global Network had strengthened in the previous 12 months with a focus on the following 3 priorities:
- High level engagement with FSRBs
- Building capacity to address FSRBs’ internal challenges
- Increasing support for FSRBs from FATF members
Key outcomes from 2021-22 included:
- A commitment from the FATF Ministerial, in April 2022, to strengthen the Global Network and endorse the strategic vision.
- An agreement in June 2022 to ensure that FSRBs are prepared to conduct the next round of mutual evaluations, and to work towards a more cohesive and collaborative Global Network.
- Continuing high level engagement between FSRBs and national and regional authorities, with a focus on the importance of AML/CFT to national security and stability.
- Continuing efforts from FSRBs to enhance internal functioning, promote FATF standards, and facilitate mutual evaluations.
- Ongoing FATF assistance for high priority FSRBs in addressing internal challenges.
- Ongoing FATF monitoring of its members’ support for FSRBs, in particular for completing mutual evaluations in a timely manner.
Achieving FATF Compliance
The Global Network was established to help countries implement FATF Recommendations at a regional level while contributing to the FATF’s AML/CFT objectives. With this in mind, most authorities require firms to implement a risk based approach to AML/CFT, assessing the risk posed by individual customers by collecting data, and screening for criminal threats, with a global scope.
Ripjar’s Labyrinth Screening platform enables firms to meet their global risk-based compliance obligations by screening against thousands of data sources in over 20 languages, and taking in sanctions lists, watchlists, and adverse media stories. Our platform is built on cutting edge machine learning technology to capture structured and unstructured data, make intuitive decisions about customer matches, and adapt as soon as possible to changes in the risk landscape.
Learn more about Ripjar’s AML/CFT compliance solutions: get in touch
The Ripjar Summit 2023 took place on 25 April 2023 at The Shard in London. The exclusive event saw senior compliance and fintech professionals from some of the world’s most prestigious banks and financial institutions participate in a discussion of the industry’s most pressing regulatory challenges, with a focus on the ways in which technological innovation delivers advantages in an evolving risk landscape.
Hosted by Ripjar’s Chief Product Officer Gabriel Hopkins, the expert panel included FINTRAIL Managing Director Maya Braine, Kharon Vice President of Sales Chris McDonagh, and Ripjar’s General Manager of Labyrinth Screening Simon McClive. The panel discussion was followed by a presentation from Ripjar’s Head of Analytics Simon Smith, on the application of AI Risk Profiles as part of an adverse media screening solution.
Let’s explore some of the highlights of the 2023 panel discussion.
What changes are we seeing in regulatory frameworks around screening?
In the context of screening challenges, the panellists pointed out that global regulators are converging around consistent messaging about the integration of technology and automation, including the sharing of AML/CFT data.
While the direction to use technology is sometimes featured in regulatory detail, the panel suggested that it was more often included in guidance and messaging from regulators, such as “Dear CEO” letters, and from enforcement actions, all of which offer clear signals about screening expectations. Panellists referenced a number of recent regulator publications that emphasised the importance of new AML technologies, including papers from the Financial Action Task Force (FATF), and the Wolfsberg Group. They also highlighted adverse media screening as an AML/CFT technology requirement in a growing number of jurisdictions – including the EU, the UK, Singapore and Australia.
One panellist stressed the need to minimise false positives during the adverse media screening process, and avoid overwhelming compliance teams with information. With that in mind, it was suggested that adverse media screening could be made more efficient in conjunction with digital onboarding processes, which allow AML/CFT solutions to digest and distribute data quickly across a network, and to fine tune algorithms to increase the accuracy of their results.
Another panellist talked about the need to work with clients to develop the quality of the datasets they collect from adverse media screening. The better the quality of data, the more valuable it is for compliance teams, and the less likely it is to generate false positives. Essentially, firms should think less about volume and more about getting “good data, good technology, and then demonstrating a return on investment”.
Are we seeing innovation in specific regulatory areas?
One member of the panel raised adverse media screening as a particular focus for AML/CFT innovation. As banks trend away from high risk customers and towards services for retail customers, the panellist pointed out that adverse media screening becomes more challenging since it necessarily involves a higher volume of names and greater use of common names – both factors that typically generate resource-sapping false positive alerts. With that in mind, many institutions are seeking ways to leverage technology to meet their increased administrative burden and maximise compliance efficiency.
What kind of sanctions challenges can we expect in the future?
On the invasion of Ukraine, one member of the panel noted that a number of firms were caught off-guard by the speed with which the Russia sanctions landscape changed throughout 2022, and felt “blind” as a result of a lack of data. They spoke about the need to not only collect data but to understand it – so that it can be turned into actionable financial intelligence. Part of the challenge is to conduct effective horizon scanning, and for firms to think about their risk exposure in the event of certain geopolitical events. The panellist cited the tension between China and Taiwan as an area of increasing concern, and suggested that firms should use data from the implementation of current Russia sanctions programmes to anticipate potential pain points should new sanctions emerge.
Echoing those sentiments, another panel member noted that horizon scanning often poses a greater challenge for smaller organisations that may be forced to engage in a level of “geopolitical analysis” that they never anticipated. They suggested that external sanctions support, such as screening technology, can be a huge advantage for smaller firms in this context – as long as they are able to source sufficient risk data on their customers.
A third panellist referenced the need for timely data as a sanctions priority, especially in the fast-moving Russia-Ukraine space, pointing out that “UK sanctions grew from 150 people and 50 organisations, to around 1,500 people being sanctioned within 12 months”. In such a crowded landscape, firms must be able to make rapid decisions, taking into account language and transcription discrepancies, supply chain risks, and the possibility of future sanctions changes.
Following a series of massive sanctions fines in 2022, what are the lessons that banks should learn?
On the topic of AML/CFT failures, and subsequent investigations and enforcement actions, one panel member noted that “most of the time… banks are failing at the basics”. They cited failures of banks to perform rigorous KYC checks, internal compliance tests, audits, and quality assurance, as examples of some of the compliance fundamentals that institutions struggle with – and eventually result in violations and costly penalties. It was stated that it’s better to tackle these foundational problems from the ground up “as opposed to playing whack-a-mole, just dealing with the last thing flagged by a regulator”.
The importance of getting the compliance balance right was emphasised: “Greater use of data and tech is what’s going to solve this. You can’t keep throwing people at the problem. Ultimately, it’s going to be technology, automation, and using your data in a more intelligent manner.”
Another panellist also called on financial institutions to integrate technology to meet their basic compliance requirements, and to ensure they have adequate data to generate valuable positive outcomes. In this sense, it was stated that compliance should not be viewed as a “cost” but as a means of “actively protecting the business”.
Acknowledging the dramatic growth of generative language AI platforms over 2022 and 2023, the panel pointed out that the technology has strengths and weaknesses. While generative platforms are “very, very good” at summarising large volumes of information, and providing plausible responses to prompts, they are not always accurate or even factual. In screening contexts where there is an absence of facts, for example, it was suggested that generative AIs sometimes make incorrect assumptions – a trend that inevitably leads to false positive alerts. One panellist also pointed out that training AI models is a long and expensive process, often costing millions of dollars. The training process must include foreign languages, and must be constantly updated to account for new trends and risks.
Despite those drawbacks, it was emphasised that generative AI has clear, game-changing potential – for helping compliance teams digest huge volumes of data and to “identify risk in a way that isn’t just keyword driven”.
Another panellist pointed out that AI tools have “proven very useful” in compliance contexts for decades. In particular, they cited AI tools’ effectiveness in combating fraud, and running credit risk assessments and claims management processes. It was suggested that the significant challenge of generative AI is “explainability”: since users “do not know why it is saying what it is”, it cannot be tested, its results cannot be checked for accuracy, and it can’t be explained to regulators. That issue currently precludes generative AI from being used widely in screening contexts.
Following the Ripjar Summit’s panel discussion, Ripjar’s Simon Smith gave a presentation on the advantages of using AI technology to enhance adverse media searches.
Understanding AI Risk Profiles
In a crowded adverse media landscape, Simon Smith emphasised the need to reduce noise, especially in situations where “thousands, or potentially millions” of articles cover a single story. Simon suggested that firms need to be able to “pivot that article view of the world” into an “entity focus” and noted that Ripjar is achieving that objective by launching technology capable of creating “risk profiles” of individual customers.
He explained how Ripjar’s AI Risk Profiles pull together the most relevant data from different financial risk topics, including sanctions list and watchlist data, to map out an entity’s risk exposure much more efficiently than searches of thousands of adverse media stories.
Creating a Risk Profile
Simon demonstrated the AI Risk Profile technology with a profile for Belarussian president Alexander Lukashenko. In creating the profile, the system identified relevant information, from news articles and other media, that linked to specific risks, including sanctions risks and financial risks, in order to build out a comprehensive, accurate risk profile. The profile integrated Lukashenko’s relatives and close associates, and set out the reasons why he was considered to be high risk, including connections to money laundering and voter fraud activities.
The Advantages of AI Risk Profiles
Ripjar’s AI Risk Profile technology essentially allows firms to take huge volumes of data and then automatically resolve that data around a single profile in order to “make it easy to surface the risks”. Simon referenced firms using article-based adverse media screening and generating unmanageable volumes of results from their searches, reaching into the tens of thousands, but then only finding a relatively low number of genuine risks. By contrast, AI Risk Profile technology significantly reduces the false positive alert rate, by up to 99% in some cases, while increasing the number of accurately identified risks.
Simon used the example of a criminal with the name “David Hugh Cameron” – a close name match to the previous UK prime minister. Article-based searches for the target name were swamped with results relating to the former prime minister, but with Ripjar’s AI Risk Profiles, firms are able to explore a list of the relevant individuals, with specific risk data integrated into each profile. Simon characterised the new approach as a “holistic view” of risk that captured a range of meaningful negative news signals about an individual in order to deliver a truer profile.
Discover Labyrinth Screening
What was clear from the Ripjar Summit is that the global risk landscape is changing, and organisations need to be prepared to meet their compliance challenges as soon as they emerge. With that goal in mind, Ripjar’s Labyrinth Screening platform is capable of searching thousands of global data sources including watchlists, sanctions lists and news stories, in over 20 foreign languages, and delivering quality, actionable intelligence in seconds. Powered by cutting edge machine learning technology, Labyrinth enables you to extract the most relevant AML data, in order to minimise noise and false positives, and build more accurate, meaningful risk profiles for every customer.
To learn more about how Ripjar can help you manage compliance challenges, get in touch today
Spain is one of the wealthiest nations in Europe, with a highly developed economy that hosts a spectrum of businesses and investment interests. Unfortunately, Spain’s growth and development as an economic power has also made it a target for criminals, who seek to exploit its financial system to commit fraud and other serious financial crimes, such as money laundering and terrorism financing. In response to those threats, the Spanish government has developed a robust anti-money laundering (AML) and counter-financing of terrorism (CFT) framework to protect the country’s economic system and meet its obligations in the global fight against financial crime.
Following recent financial scandals across Europe, and high profile prosecutions of money launderers within Spain, Spanish regulators have increased their focus on screening and compliance. Given the potential for steep financial penalties, it’s vital that businesses understand Spain’s AML regulations, how to achieve compliance, and how to manage incoming regulatory challenges.
Spain’s AML Regulator: SEPBLAC
Established in 1993, the Commission for the Prevention of Money Laundering and Financial Crimes, or Servicio Ejecutivo de la Comisión de Prevención de Blanqueo de Capitales (SEPBLAC) is Spain’s AML/CFT regulator and financial intelligence unit (FIU). SEPBLAC operates under the authority of the Secretariat of State for Economy and Business Support, which is a collective composed of a number of Spanish government representatives and law enforcement agencies.
In its supervisory role, SEPBLAC’s mission is to ensure that financial institutions comply with Spain’s risk-based AML/CFT regulations “in accordance with the best international practices”. As an FIU, SEPBLAC handles the submission of suspicious transaction reports (STR), analysing financial data to determine whether to launch criminal investigations.
Like most global AML/CFT regulators, SEPBLAC also has a duty to work with international counterparts to address financial crime threats. To that end, SEPBLAC coordinates with other EU supervisory authorities and FIUs, and shares financial intelligence on platforms such as FIU-Net and the Egmont Secure Web (ESW).
Key AML Regulations in Spain
Spain’s main article of AML legislation is Law 10/2010 of 28 April on the prevention of money laundering and terrorist financing. The legislation imposes risk-based AML/CFT compliance obligations on firms within Spain, along with reporting and record-keeping obligations.
Anti-Money Laundering Directives: As an EU member, Spain is required to transpose into law the EU’s Anti-Money Laundering Directives (AMLD). The most recent AMLD, the Sixth Anti-Money Laundering Directive (6AMLD), included a new definition of the crime of money laundering (that included aiding and abetting), set out a harmonised list of money laundering predicate offences, and increased the minimum penalties for persons convicted. Spain implemented 6AMLD through Royal Decree-Law 7/2021, of April 27.
Penalties for money laundering in Spain are imposed under the Criminal Code and include a prison sentence of up to 6 years and a fine of up to three times the value of the assets involved. Authorities may also impose business prohibitions of up to 3 years on persons found guilty of money laundering.
How to Comply with Spain’s AML Regulations
Following Financial Action Task Force (FATF) guidance, Spain requires firms to take a risk-based approach to AML/CFT, which means they must assess the risk that their customers present, and then deploy proportionate compliance measures. The FATF Recommendations set out the measures and controls that must be implemented as part of a risk-based AML/CFT compliance solution. These include:
- Customer identification: Firms must collect identifying information from customers in order to build accurate risk profiles. Suitable customer due diligence (CDD) information includes names, addresses, birth certificates, and business incorporation documents. High risk customers may warrant enhanced due diligence (EDD) measures.
- Beneficial ownership: Firms must ensure that customers are not using shell companies or corporate structures to conceal their identities and evade compliance controls. Accordingly, AML/CFT solutions should also include verification of the ultimate beneficial ownership (UBO) of customer-entities.
- Suspicious transactions: Firms must screen customer transactions for suspicious activity, including transactions with high risk individuals or transactions that involve high risk jurisdictions.
- Customer screening: Firms should ensure that customers are not designated on international sanctions lists or watchlists, and are not politically exposed persons (PEP), by screening customers on an ongoing basis against the relevant data sources.
Adverse Media Screening: One of the most effective and accurate ways to establish customer risk is to screen customers against adverse media sources, which include news stories, social media, blog posts, forum posts, and more. Adverse media typically reveals customer AML/CFT risk, such as involvement in financial crime, before it is confirmed by official sources – and so enables firms to deploy the appropriate compliance response as quickly as possible. Firms should dedicate screening resources to capture a wide range of adverse media from around the world.
Incoming AML Regulations
In June 2022, the EU reached a provisional agreement to introduce a new regulatory framework for unbacked crypto-assets and stablecoins, known as Markets in Crypto-Assets (MiCA). The EU also passed the Transfer of Funds Regulation (TFR), which extends AML/CFT regulations to cryptocurrency service providers. Both regulations will come into effect in Spain, and across the EU, in 2024. With the new regulations on the horizon, firms in Spain should ensure they adjust their compliance solutions to account for new levels of risk from transactions that involve virtual assets.
AML Solutions: Screening Technology
Under the EU’s AMLD regulations, firms in Spain must be prepared to screen against a range of global data sources including adverse media. With that in mind, it’s vital that firms find a technology solution capable of searching for customer names with suitable scope, flexibility, and accuracy in order to capture breaking news stories, new sanctions designations, social media entries, and other types of media – and do so quickly whilst minimising false positive alerts.
Ripjar’s Labyrinth Screening platform gives firms that capability. Built on cutting edge machine learning technology, Labyrinth enables comprehensive, real-time searches of thousands of global data sources, including foreign news articles, sanctions lists, and watchlists, in over 20 languages, and delivers actionable financial intelligence in seconds. In a complex and changing EU regulatory landscape, Labyrinth lets firms tailor their compliance response to specific AML/CFT risk factors, react to new legislation and criminal threats, and know as soon as possible when a customer’s risk level changes.
Contact us to discuss how Ripjar can support your AML compliance in Spain
In March 2023, the UK launched its Economic Crime Plan 2, building on the first iteration of the plan with measures to “continue to to transform the UK’s response to economic crime”. On announcing the new plan, the government highlighted the damage that economic crime inflicts, with over £100 billion pounds laundered in the UK each year, and with fraud accounting for around 41% of all crime. The government also highlighted the Russian invasion of Ukraine as an example of the growing criminal threat posed by kleptocracies.
Acknowledging the evolving nature of the financial landscape, the updated UK Economic Crime Plan designates new resources and financial support for enforcement authorities, and for fraud, anti-money laundering (AML) and counter-financing of terrorism (CFT) efforts. As the new Economic Crime Plan comes into effect, it’s important that UK firms understand how it will change the AML/CFT landscape and how to ensure compliance under the new regime.
The First UK Economic Crime Plan
Launched in 2019, the first version of the plan was known as the UK Economic Crime Plan 2019 to 2022, and was implemented to protect the UK from the “significant threat” of serious financial crimes such as fraud, money laundering, and the financing of terrorism. The plan sought to bring together “the capabilities, expertise and intelligence of the public and private sectors” in order to defend the UK’s economy and “support legitimate growth and prosperity”.
To that end, the original Economic Crime Plan set out the following 7 strategic priorities for combatting economic crime in the UK:
- To better understand the threat of economic crime and the UK’s performance in combatting it.
- To find better ways to share and use information between public and private sector institutions for the purposes of addressing economic crime.
- To make the “powers, procedures and tools” of UK law enforcement authorities as effective as possible.
- To strengthen the collective capabilities of UK law enforcement, the justice system, and the private sector in detecting and disrupting financial crimes.
- To build resilience to financial crime by enhancing private sector management of risk and risk-based supervision.
- To improve ownership transparency of legal entities and arrangements.
- To develop an “ambitious international strategy” for addressing economic crime in order to enhance the UK’s global influence.
Key Outcomes of the First Plan
The UK government has characterised the implementation of the first Economic Crime Plan as a success, citing the following achievements:
- An improved understanding of criminal threats through joint public-private risk assessment initiatives.
- Reform of the UK’s Suspicious Activity Report (SAR) regime, and a comprehensive review of the UK’s money laundering regulations.
- New legislation including the Economic Crime (Transparency and Enforcement) Act, the Economic Crime and Corporate Transparency Bill, and the Online Safety Bill.
- Enhanced domestic and international cooperation.
UK Economic Crime Plan 2: Key Updates
The UK Economic Crime Plan 2 seeks to “build on the foundations” of its predecessor and to “focus more directly on impact and outcomes”. The plan allocates £200 million of government investment and £200 million from the Economic Crime (Anti-Money Laundering) Levy to achieve that goal, with a focus on 3 key outcomes:
Reducing money laundering and recovering more criminal assets
- Limiting abuse of UK corporate structures
- Increasing the effectiveness of the UK’s AML/CFT regulatory regime
- Combatting cryptoasset crimes
- Improving SAR intelligence, feedback, and analysis
Combatting kleptocracy and sanctions evasion
- Improving financial sanctions design, implementation and enforcement
- Strengthening the international and operational response to kleptocracy
Cutting fraud
- Pursuing criminals responsible for fraud and blocking fraud
- Helping the Public Sector Fraud Authority reduce the impact of fraud
New Initiatives Under the Updated Plan
In order to achieve the outcomes set out above, the new plan will put the following ideas and reforms into action:
- Financial crime investigations: The Economic Crime Plan 2 will see the recruitment of 475 financial crime investigators who will address money laundering and asset recovery.
- Public-private coordination: A new approach to public-private coordination will establish joint priorities in order to maximise resources, and detect and prevent financial crime.
- Fintech: Law enforcement agencies will implement state-of-the-art technology solutions, including advanced data analytics, to keep pace with criminal methodologies.
- Cryptoassets: The government will establish a new Crypto Cell which will pool the expertise and enforcement tools of law enforcement agencies and regulators in order to tackle the criminal abuse of cryptoassets.
- Supervisory reform: The new plan will introduce “ambitious reform” of the UK’s supervisory regime in order to encourage greater information and intelligence sharing.
- Kleptocracy: The government will expand the UK’s Combatting Kleptocracy Cell, harnessing the expertise of the National Crime Agency (NCA).
How Technology Can Help With Economic Crime Plan Compliance
The second Economic Crime Plan emphasises a greater degree of cooperation between public and private entities, and applies a greater AML/CFT scope so that firms can deal with evolving global risks such as international kleptocracy and cryptoasset crime. In this new regime, quality, actionable data will be critical: firms will need to be able to collect and analyse data on their customers, from sources around the world, distribute that data, and make effective compliance decisions as quickly as possible. Similarly, as the UK government implements aspects of the new plan, the regulatory landscape may shift, which means firms will need to be agile in their approach to regulatory compliance and be prepared to react when new threats emerge.
Ripjar’s Labyrinth Screening platform is designed for advanced data analysis in a challenging, fast-moving regulatory environment. Built with cutting-edge machine learning technology, Labyrinth Screening enables firms to search customers against thousands of global data sources, and generate actionable financial intelligence in seconds. Updated in real time with the latest financial crime data, Labyrinth searches cover global adverse media stories, sanctions lists and watchlists, and the platform allows firms to tailor searches for the most relevant risk data in order to minimise false positives and enable strong, speedy decision making.
Contact us to discuss how Ripjar can help you comply with the UK Economic Crime Plan
The Middle East is an increasingly important financial destination, with economic development across the region attracting global capital and innovation. However, the dramatic growth of certain Middle Eastern countries has led to an increase in financial crime, including money laundering and terrorism financing, which typically exploit the region’s high risk industries such as construction, oil and gas, and real estate. Corruption has also been a traditional financial crime risk in the Middle East, with a number of recent scandals, such as the $3 billion fraud case that led to the collapse of NMC Healthcare in the UAE in 2020.
Middle Eastern countries have responded to the criminal threats they face by implementing anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations, which impose a range of screening, monitoring, and reporting regulations. To help your firm navigate its compliance landscape, let’s take a closer look at the AML/CFT environment in a number of Middle Eastern jurisdictions.
Key Middle Eastern AML Regulators and Regulations
UAE – CBUAE
The United Arab Emirate’s (UAE) primary financial regulator is the Central Bank of the UAE (CBUAE), which provides supervision for licensed financial institutions and has a mission to “regulate, develop, oversee, and maintain” the UAE’s financial system. The bank carries out its supervisory duties through its Banking and Insurance Supervision Department, which includes the Regulatory Development Division, which sets the UAE’s AML/CFT policies.
Key UAE AML regulations: The UAE’s main money laundering regulation is the Federal Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations. The law is described as a “key pillar in combating money laundering and the financing of terrorism” and requires financial institutions to implement a risk-based AML/CFT programme and appoint a compliance officer.
Qatar – QFCRA
Qatar’s financial regulator is the Qatar Financial Centre Regulatory Authority (QFCRA). Established in 2002, the QFCRA has a mandate to “authorise and regulate firms and individuals conducting financial services” and maintains a dedicated AML/CFT unit which works to ensure compliance with Qatar’s AML/CFT rules. The Authority also contributes to “Qatar’s ongoing engagement with international standard-setting bodies”.
Key Qatar AML regulations: Qatar’s Law No. (20) of 2019 on Combating Money Laundering and Terrorism Financing is the state’s primary AML/CFT law. The law sets out a range of risk-based compliance obligations for financial institutions in Qatar, including customer due diligence, beneficial ownership, and customer screening and monitoring.
Saudi Arabia – Ministry of Anti-Money Laundering, SAMA, SAFIU
There are a number of government bodies that address money laundering in Saudi Arabia, including the Ministry of Anti-Money Laundering, the Saudi Arabian Monetary Agency (SAMA), and the Saudi Arabian Financial Intelligence Unit (SAFIU). The AML/CFT efforts of these entities are coordinated through the Permanent Committee for Anti-Money Laundering, which is headquartered at the SAMA head office in Riyadh.
Key Saudi Arabia AML regulations: The main AML regulation is the Saudi Arabia Cabinet Decision No. 80/1439, approving the Anti‐Money Laundering Law, also known as the AML Law. There are a number of important supporting laws to the AML Law, including the Implementing Regulation to the AML Law October 2017. Similarly, the main CFT law in Saudi Arabia is the Law on Combating Terrorism Crimes and Financing (and its corresponding implementing regulation). The AML and CFT laws impose risk-based compliance obligations on firms within Saudi jurisdiction.
Oman – CBO, CMA
The Central Bank of Oman (CBO) is Oman’s primary AML/CFT authority, responsible for supervising and licensing all financial institutions in the country, and implementing its AML/CFT regulations. The Capital Markets Authority (CMA) also has an AML/CFT regulatory role but is responsible for supervising Oman’s capital market and insurance sectors.
Key Oman AML regulations: The principle AML/CFT law in Oman is the Law on
Combating Money Laundering and Terrorism Financing (Royal Decree 30/2016). Like other Middle Eastern states, the AML Law imposes reporting and record-keeping, and screening and monitoring obligations on financial institutions within Oman’s jurisdiction.
Turkey – MASAK
Turkey’s AML/CFT authority is the Financial Crimes Investigation Board, or Mali Suçlar Araştırma Kurulu (MASAK). Operating under the Ministry of Finance, MASAK has the power to implement AML/CFT policy in Turkey, conduct investigations, and assist law enforcement agencies with prosecutions.
Key Turkey AML regulations: Implemented in 2006, Turkey’s principle AML law is Law No. 5549 on Prevention of Laundering Proceeds of Crime, which imposes reporting, record-keeping, monitoring and screening obligations on Turkish financial institutions. In 2023, Turkey introduced Law No. 6415 on the Prevention of the Funding of Terrorism, which expanded the definition of terrorism financing and the power of authorities to prosecute alleged cases.
How to Comply with the Middle East’s AML Regulations
The Middle Eastern states listed above have committed to implementing the AML/CFT standards recommended by the Financial Action Task Force (FATF) – either as members of the FATF, or as members of the Middle Eastern and North Africa FATF (MENAFATF), an FATF-style regional body.
Following the FATF Recommendations, Middle Eastern jurisdictions must develop and implement risk-based AML/CFT compliance regulations, which require firms to establish individual customer risk levels and deploy proportionate compliance measures in response. In practice, this means that Middle Eastern financial institutions must conduct robust data collection and screening processes, including:
- Identity verification: Firms should apply customer due diligence (CDD) measures to establish the identity of their customers and build accurate risk profiles. Where customers present a higher risk of financial crime, firms should apply enhanced due diligence (EDD).
- Transaction screening: Middle eastern firms must screen customer transactions for suspicious activity, which may include transactions with high risk individuals or transactions involving high risk jurisdictions.
- PEP and sanctions screening: To establish customer risk levels, firms must check that customers are not suspected of financial crimes, are not politically exposed persons (PEP), and are not designated on international sanctions lists. To that end, firms must be able to screen customers against the relevant sanctions and watchlists.
- Adverse media screening: Firms should screen their customers for involvement in adverse media – which may disclose important risk information before it is confirmed by official sources. Firms should screen for adverse media with a global scope in order to ensure they collect as much risk data as possible.
Recent AML Developments in the Middle East
The Middle East can be a volatile AML/CFT environment with risk levels varying significantly between jurisdictions.
Following a Plenary and Working Group Meeting in 2022, the FATF chose to designate the UAE on its list of Jurisdictions Under Increased Monitoring, also known as the Grey List, as a result of failures to address “strategic deficiencies” in its counter-terrorism financing framework.
Designation on the Grey List means that financial institutions must be alert to an elevated risk of doing business in listed countries, while listed countries are required to work with the FATF to address points on an AML/CFT action plan. The UAE, for example, recently issued guidance for financial institutions on improving their understanding of AML/CFT risk, including implementing digital ID systems to enhance CDD.
The UAE is not the only Middle Eastern country on the Grey List, and joins Syria, Yemen, and Turkey, which was added in October 2021. Iran is designated on the FATF’s Black List, or High Risk Jurisdictions Subject to a Call for Action, which indicates a high level of AML/CFT risk and requires firms to deploy suitable countermeasures.
Customer Screening Technology for Middle East AML Compliance
Many financial activities in the Middle East are associated with industries that pose an elevated risk of financial crime but that stretch across borders and involve complex international supply chains. With this in mind, it is critical that firms implement a customer screening solution capable of matching names to watchlists, new stories, and other media in the Middle East and across the world, capturing large volumes of data while minimising noise and false positive AML alerts.
Ripjar’s Labyrinth Screening platform integrates cutting-edge machine learning technology and advanced analytics to help your firm enhance its customer screening process in the Middle East and beyond. Labyrinth enables searches of thousands of data sources, including news stories, sanctions lists, and watchlists in over 20 foreign languages, taking into account non-Western spelling conventions and characters, such as the use of Arabic, to enable effective, accurate decision making. Fast, flexible and customisable to your risk appetite, Labyrinth Screening offers a powerful advantage in managing the diverse and evolving risk landscape of the Middle East.
The AML & FinCrime Tech Forum took place in January 2023, bringing together leaders, experts, and innovators from across the data science, fintech, and anti-money laundering (AML) and counter-financing of terrorism (CFT) communities. The Forum focused on the latest strategies to combat financial crime, with debates, presentations, and demonstrations of fintech and regtech innovations.
Ripjar’s Chief Product Officer, Gabriel Hopkins, attended the event to lend his professional expertise to the panel discussion: Future FinCrime and the Pain Points Within Your Organisation. The panel included speakers from banks and fintech organisations, who discussed the most dangerous emerging criminal methodologies, how they impact and harm both customers and institutions, and how technology can help address the threats. Moderator Howard Rawstron, Head of Economic Crime Prevention Oversight at Lloyds Banking Group, acknowledged that many of the topics involved potential future scenarios, but that the panel’s pedigree would ensure that the debate benefitted from a depth of industry experience.
Let’s take a closer look at some of the key questions and points from the discussion.
What are the biggest emerging financial crime threats to both customers and institutions?
The panel opened by examining the significant challenges that institutions face in keeping pace with the sophistication of financial criminals. Susan Symes, UK Head of Investigations at Fidelity International, pointed out that criminals increasingly exploit technology to use their victims to support the fraud they are committing – using push payments for example to get customers themselves to initiate fraudulent payments unwittingly, and so make it harder for firms to detect the presence of bad actors. Symes added that, in many cases, customers are unaware that they are victims of fraud: criminals may imitate certain brands or products to disguise fraud, or use the pretext of a maturing payment that offers returns down the line to keep victims unaware of the fraud until months later.
Renitha Singh, Group Financial Crime Compliance Officer at Liberty Holdings, raised the prospect of “state capture” as a significant financial crime threat. Singh used the example of the infiltration of the South African government by a criminal organisation to illustrate the potential for organised crime groups to extract huge amounts of money from corrupt or vulnerable state entities.
Ripjar’s Gabriel Hopkins echoed those sentiments, pointing out that financial crime, and specifically fraud, had undergone a change in recent years: from something that happened to people, to something that people did to themselves. Hopkins suggested that shift had made it much more difficult for banks to stay ahead of financial criminals.
How should institutions balance customer controls with customer experiences?
The ongoing challenge of financial crime compliance is to implement AML/CFT controls that are robust enough to detect criminals and fulfil regulatory obligations, without making a firm’s products and services too onerous for customers to use.
The panellists cited the careful integration of technology as a significant advantage in addressing this issue. Fenergo VP of Product Marketing Aoife Doyle suggested that the front-end experiences of customers were less of a problem; with a lot of effort put into the technical quality of the front-end, customers generally receive seamless (and pleasing) experiences when interacting with websites directly. Doyle went on to contrast those experiences with the back-end process, during which firms are required to “scramble” to retrieve data from multiple systems in order to fulfil regulatory requirements, creating significant administrative friction and slowdown in the ultimate delivery of services.
Susan Symes focused on the specific risks of balancing experiences with compliance, pointing out that the dynamic plays into the hands of criminals who may offer expedited services as a way to extract money and data from frustrated customers. Symes emphasised that “disruption” was the key to tackling fraud: the more obstacles fraudsters face when attempting to gain customers’ confidence, the more likely their efforts are to fail. On the notion of AML/CFT controls versus customer experiences, Symes stated that it was always “easier to sleep” knowing that customers were frustrated, than having handed their details to criminals.
Acknowledging those ethical and regulatory concerns, Gabriel Hopkins noted that artificial intelligence (AI) and machine learning tools nonetheless represent a “transformational” asset in the battle to deliver positive customer experiences by giving firms the power to “make strong decisions for their customers, very very quickly”.
How should firms handle the threat of ultimate beneficial ownership?
Where criminals use corporate infrastructure to conceal their identities, electronic identity verification takes on a new importance. Aoife Doyle suggested that firms should seek to leverage a rules-based approach to establishing ultimate beneficial ownership (UBO) – especially in jurisdictions where the threshold for beneficial ownership may refer to individuals with ownership of 10% or even 2% of a given company.
Doyle also suggests that firms must be prepared to work hard to establish UBO, including exploring opportunities to re-use established data to inform compliance decisions. Notably, the complexity of the UBO challenge requires firms to go beyond tech solutions and factor in skilled human intelligence for those instances where compliance efforts need to go deeper than tech-derived identity verification.
In an industry facing a shortage, what skills are needed for economic crime prevention?
While acknowledging the power of employee talent and intelligence in compliance investigations, the panel agreed that it was difficult to overstate the utility of technology, and important not to over-rely on human intuition. Renitha Singh brought both a regulator and commercial perspective to the question, pointing out that compliance technology enables even untrained employees to identify suspicious activity and intervene to prevent potentially serious financial crimes.
Emphasising the “amazing” accomplishments of fintech, Gabriel Hopkins stressed there was an ongoing important role for humans in financial crime processes. Referencing the critical “sixth sense” that top fraud analysts have for spotting criminal activity, he suggested that it was probably “a little too soon” for the eradication of human roles, particularly within fincrime compliance where there are factors which still limit automated decision making. However, Hopkins also pointed out that technology innovation is a constant, and that a number of new, exciting innovations, such as ChatGPT generative AI, are likely to have a big impact in the near future. Hopkins stressed the need to manage the hype around new technology: for example, while ChatGPT has undeniable potential, it exhibits a number of flaws in its current form which limit its use in fraud and financial crime prevention.
How can collaborations help tackle financial crime?
Where government institutions lack the resources to tackle financial crime effectively, or (like the South African government) are compromised by bad actors, collaboration with private entities can be an effective AML/CFT strategy. Renitha Singh referenced the collaborative success of the South African Money Laundering Integrated Task Force (SAMLIT), a think tank that combines public and private resources in a joint effort to assist in prosecutions. Singh pointed out that the value of public-private collaborations lies in their potential to share data and to work operationally – as opposed to the often-ineffectual “gestures” of governments.
In agreement, Gabriel Hopkins added that all collaboration initiatives must be backed by strong security to ensure the safety of public information, and by the political will to effect real change.
How are different demographics affected by financial crime?
In a constantly changing financial landscape, criminal threats can vary significantly by demographic. Susan Symes set out the variety of strategies that criminals use to approach customers, including targeting the users of certain apps or the viewers of certain adverts, or compromising personal devices such as mobile phones. Demographic threats are not fixed, and may change by age, wealth, time of year, and so on. With no one-size-fits-all solution, firms must think about the specific vulnerabilities of their customer groups, and be prepared to continually assess the countermeasures they deploy to prevent crimes.
What can firms do to improve the financial crime detection and investigation process?
The panel emphasised the need to prioritise data in any AML/CFT solution in order to optimise outcomes. While finding and stopping criminal activity directly is obviously a priority, Gabriel Hopkins stressed the need to use customer data contextually as a way to discern changes in behavioural patterns – a strategy that has proved to be effective in almost all levels of technology deployment.
Getting the most out of disparate, dispersed data is key to the investigative process – and with this objective in mind, Hopkins also suggested that firms take steps to make their data as accessible and comprehensible as possible, including introducing a knowledgebase framework and integrating AI-enabled tools. Ripjar’s Labyrinth Screening platform, for example, is built for exactly that purpose, with cutting-edge AI and machine learning technology giving firms the power to identify high risk customers as quickly as possible and make better compliance decisions.
Discover Labyrinth Screening Advantages
In a complex risk landscape, Labyrinth Screening searches thousands of global data sources across different languages, including watchlists, sanctions lists, and news stories, delivering actionable intelligence in seconds while minimising noise and false positives. Labyrinth also gives firms the ability to tailor searches for the most relevant AML/CFT data, building more accurate, more useful risk profiles for each customer.
To learn more about how Ripjar can manage AML/CFT pain points, get in touch today.
As technology transforms the financial landscape, and criminal methodologies become more sophisticated, governments and authorities must address emerging risks by integrating suitable digital tools – a process known as digital transformation.
Given the scale of the challenge, the Financial Action Task Force (FATF) has characterised the digital transformation of anti-money laundering (AML) and counter-financing of terrorism (CFT) as a “necessity”, and President T. Raja Kumar has stated that the FATF will be “exploring the opportunities that technology can offer to improve AML and CFT efforts”. The ongoing digital transformation of the intergovernmental organisation will have consequences for firms in every corner of the world, which must adjust their compliance frameworks to meet new challenges.
The FATF has published a range of guidelines to help firms understand how it is achieving digital transformation. Let’s take a look at some of the key considerations, and explore what the process means for your AML/CFT compliance.
The Adoption of New Technologies
The FATF’s digital transformation emphasises both the integration of new technologies and “innovative ways to use established technology-based processes”. In this context, digital transformation refers to the holistic adoption of digital tools and methods, rather than the process of simply converting analogue data to digital content. The FATF’s approach to digital transformation focuses on the following areas:
- New opportunities: The FATF is working to identify opportunities to leverage “emerging and existing technology-based solutions” for AML/CFT innovation. Following research, the FATF published a report into the possible opportunities and challenges of new technology-based AML/CFT solutions.
- Data analytics: The FATF is exploring how technology can enhance the analysis of “large amounts of structured and unstructured data”. This focus includes data pooling and collaborative analytics which can make it easier to identify and mitigate money laundering and terrorism financing activities, and reduce false positive alerts, while protecting user privacy rights.
- Operational capability: The FAFT will examine ways in which operational agencies can “harness technology to strengthen their operational capability and resilience”. Focus will also fall on optimising the use of technology, enhancing communication and information-sharing, and removing barriers to digital transformation.
- Digital identity: Research suggests that reliable digital ID makes it easier to perform customer identification and conduct transaction monitoring. To this end, the FATF is exploring the benefits of digital ID for AML/CFT and for improving access to financial services.
Digital Transformation for FATF Operational Agencies
FATF operational agencies, which broadly refers to Financial Intelligence Units (FIU) within the FATF Global Network, have been integrating digital tools to enhance AML/CFT workflows and solve day-to-day challenges for years. Beyond the automated speed and accuracy of digitisation, the transformation trend reflects a desire amongst FIUs to take advantage of the following key benefits:
- Data utility: Digital transformation offers FIUs real time access to a wider landscape of data, stored in multiple databases. That access facilitates better comprehension of AML/CFT data and analysis of AML/CFT alerts.
- Data capacity: Digital transformation increases data handling capacity, with FIUs able to analyse larger volumes of unstructured data. By drawing from a larger volume of data, analysts are more likely to be able to observe connections between disparate suspicious transactions.
- Data analysis: In the face of increasing volumes of suspicious activity reports (SAR) and suspicious transaction reports (STR), the digital transformation process enhances the efficiency and quality of AML/CFT analysis, enabling FIUs to integrate advanced analytic tools, and mine data more effectively for patterns that indicate criminal activity.
- Emergent risks: By integrating innovative new tools, such as AI and machine learning systems, digital transformation offers analysts a better understanding of emergent AML/CFT risks and criminal typologies, and a better chance of spotting behaviour that does not correlate with established risk profiles.
- Alert management: Digital tools enable FIUs to better communicate and disseminate SAR information across departments, with enhanced data security and privacy protection. Similarly, digital tools make it easier to store, analyse and provide reporting feedback for STRs.
Digital Transformation for Law Enforcement
Like operational agencies, global law enforcement agencies are also adopting digital tools and technologies to help them detect and investigate financial crimes. The FATF has acknowledged the importance of digital transformation to law enforcement agencies and published a confidential report into the possible AML/CFT applications and opportunities of digital technology.
The FATF also published a public summary of the law enforcement report, which includes the following highlights:
- Alignment of vision: The FATF suggests that law enforcement stakeholders should align their vision for their digital transformation objectives. This means considering mid and long-term issues, such as internal priorities, available resources, and technological capabilities, and ensuring that all parties are able to buy in to proposed digital initiatives.
- Integrating digital tools: Law enforcement agencies should be clear on which digital tools they need to to get the most out of AML/CFT data, and how to use them. The integration of digital tools should follow a clear roadmap, matched with necessary resources, and supported by in-house management or third-party partners.
- Ethical considerations: The integration of new screening and monitoring technologies often creates ethical considerations, especially for personal data privacy and protection. The FATF suggests that law enforcement authorities should consider whether their digital transformation efforts align with existing data protection and security frameworks, and whether legislative amendments are needed to accommodate them.
- Investigative support: The FATF suggests that law enforcement agencies should understand which money laundering and terrorism financing crimes would be most impacted by the application of digital tools. Agencies should also consider how to roll out their digital initiatives most effectively, and whether to develop core digital tools in-house or acquire them from third parties.
Law Enforcement Intelligence
Digital tools enable law enforcement and other government organisations to maximise their use of valuable intelligence faster and more effectively. For example, AI-powered data fusion investigative tools, such as Ripjar’s Labyrinth Intelligence platform, enable the understanding of patterns across disparate complex data sets, deriving additional intelligence knowledge and undertaking collaborative reporting.
Those agencies can additionally utilise Ripjar’s Labyrinth Screening platform to enable searches for customers and counterparties while taking into account key characteristics, including mentions in the media or high risk jurisdictions, in order to identify suspicious activity more accurately.
The Future of the FATF’s Digital Transformation
The FATF has established the potential of new technologies to make AML/CFT measures “faster, cheaper and more effective”, and to enhance the implementation of the FATF Recommendations. While it explored the opportunities of data pooling, collaborative analytics, and data protection in 2020-21, in its Annual Report 2021-22, the FATF focused on advanced analytics, in particular machine learning systems, as a means to analyse financial intelligence, and better understand AML/CFT risks.
The specific benefits of machine learning technology include:
- Automated analysis of established customer data in order to distinguish suspicious transactions from normal financial activity.
- A reduction in the need for front-line human compliance intervention.
- Enhanced customer risk assessment and onboarding processes, along with improved customer experiences.
- Enhanced information exchange between AML/CFT counterparts.
- Adaptive learning processes which account for emerging criminal methodologies and changes in regulation.
Digital Transformation Compliance Solutions
Digital transformation represents a cultural change for the financial services community as much as a logistical one. Beyond seeking effective software systems to replace analogue processes, the FATF’s conception of digital transformation will require regulators and private sector firms to optimise their AML/CFT solutions by effectively harnessing the power of compliance technology – and taking advantage of the analytic possibilities of AI innovation.
In addition to delivering automated speed and accuracy, Ripjar’s Labyrinth Screening is designed to help firms meet the digital expectations of both the FATF and domestic regulators. Powered by cutting edge-machine learning technology, Labyrinth Screening is capable of fusing internal customer data with thousands of global data sources, including international watchlists, news stories, and corporate records, in real time, in over 20 foreign languages. Fully customisable to your firm’s compliance needs, Labyrinth delivers actionable financial intelligence in seconds, automatically extracting the most relevant risk data so that your firm can keep pace with criminal threats in a changing financial landscape.
Learn more about Ripjar’s AML/CFT compliance solutions to support your digital transformation, get in touch with us today