Balancing global regulatory requirements for fraud and AML to align practices globally

Balancing global regulatory requirements for fraud and AML to align practices globally

by James (Jim) Stubbs, Former Managing Director, Deputy Global Head Anti-Money Laundering, Citi

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I have been working in FCC for more than 30 years.  Formative experiences include assisting banks manage multiple criminal investigations of the institution and first line staff; growing business in ultra high risk jurisdictions; and assisting law enforcement follow the money after the attacks of September 11, 2001.  I have travelled to and worked in more than 45 countries and co-instructed training sessions on banking for bankers, law enforcement and the CIA at their Langley HQ.

What, for you, are the benefits of attending a conference like the Fraud and Financial Crime USA Congress and what can attendees expect to learn from your session?

Conferences provide important opportunities to engage with speakers who are leaders in the field; allow participants to benchmark their own knowledge and practices; and gain exposure to how others are addressing common challenges in the industry.  Attendees at this session can hear strategies for and benefits of driving aligning practices globally.  They will also note some of the barriers to full achievement of common and compensating controls.

You will be joined by Metropolitan Commercial Bank and KEB Hana Bank Canada, in your opinion, what are the key challenges to aligning regulatory practices globally?

Inconsistent laws and regulations are a key driver to these challenges.  Uneven business and risk management standards and practices around the world that may result in an uneven playing field and a lack of consistent talent availability around the world are among some of the challenges to alignment.

Could you provide brief insights on global standards to handle KYC efficiently?

Efficient KYC begins with a focus on those core elements that drive core due diligence: Reliable identification of the customer; understanding the sources and extent or wealth; and the type of banking relationship sought by the client.  These elements should be defined and captured in as common a manner as practicable and in a format that can facilitate their use in other areas of the program such as periodic review frequency or conditions, transaction monitoring risk drivers and comprehensive risk assessment.

Standards need to be adjusted based on customer type and products used.

What are the benefits to balancing local legislation and banking policy?

Having a clear and authoritative understanding of the requirements of local law and incorporating them Into bank policy can assist to simplify the program execution by using common practices, training, testing, etc.  Consideration to the benefits from a substantive risk management approach should be made, i.e. is it a practice that adds value to risk management or is it solely a compliance risk requirement.

How do you see the impact of Fraud and Financial Crime evolving over the next 6-12 months?

The Impact of fraud and financial crime compliance is evolving to demand more of financial Institutions deeper in the financial community.  That is, the practices required of larger institutions will Increasingly be expected by regulators within the programs of smaller banks operating in multiple jurisdictions or with non-resident customers.  New Industries such as new payment providers, the marijuana industry and cryptocurrency exchanges will drive concern from regulators until greater familiarity with practices and associated risks become clearer.

Finally, banks will Implement more automation to reduce manual activities related to information aggregation In the due diligence and investigations processes. In the near term this will still pertain to higher volume shops as design adaptation, Implementation and other expenses will maintain high barriers to entry to those looking for self-funding solutions.

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