Why it is important to achieve know-your-customer compliance

Money laundering and associated regulations are always hot topics, though perhaps now more so than ever, with efforts towards more centralised control high on the agenda at the EU level.

Therefore, preparation is critical to avoid being targeted by government agencies for breaching regulations. We can already see a vast increase in money laundering-related cases handled by the Swedish Financial Supervisory Authority and Stockholm County Administrative Board.

Fines for non-compliance with the AMLD regulations

The number of published sanction decisions published by the Swedish Financial Supervisory Authority (FI) increased six times between 2019 and 2020. Furthermore, In 2020, more than 5 billion SEK in sanctions were issued to banks and companies under the FI’s supervision.

The Administrative Board supervises specific businesses under the Money Laundering and Terrorist Financing Prevention Act. Their work focuses heavily on the supervision and inspection of companies and the implementation of procedures against unregistered businesses.

The County Administrative Board supervises many organisations covered by the Anti-Money Laundering Directive. Similarly, the growing number of organisations correlates to the number of made decisions.

Companies need help to meet the requirements of complex regulations

Many of the County Administrative Board’s interventions are against companies in industries that historically may not have had to consider their KYC or Customer Due Diligence processes, such as:

• art galleries
• auction houses
• artists
• associated re-sellers

However, this changed once they became part of a supervised industry affected by the recent revisions to the Anti-Money Laundering Directive.

Based on the available data, it is no surprise that the County Administrative Board intervenes primarily due to inadequate procedures for facilitating KYC, customer due diligence measures, and reporting.

These breaches of the anti-money laundering regulations have resulted in fines of up to several million SEK for individual cases. Data from Stockholm’s County Administrative Board confirms that the number of government agency interventions in money laundering cases has almost quadrupled between 2018 and 2021.

How to comply with the AMLD regulations

Building the ultimate risk model is essential to the overall KYC process. Simply put, Know Your Customer (KYC) is the process of identifying who you are doing business with. Therefore, a risk-based approach is a must for complying with regulations.

The risk process usually includes three stages:

1. The first step is to conduct a risk assessment of the business based on the products and services on offer and the risk level of being used for money laundering or terrorist financing.
2. The second step is to conduct a general risk assessment of the customers by creating a risk profile with a risk level for each client. You should monitor and update these profiles accordingly.
3. Lastly, place routines and guidelines for monitoring and reporting suspected cases to the authorities.

It is important to note that you must always conduct a risk assessment regardless of your industry.

At Trapets, we have integrated KYC screening into all our services to ensure that KYC data is used from screening to onboarding to transaction monitoring. This allows you to submit reports to the authorities quickly.

How Trapets can help you with your KYC processes

Our AML platform can easily integrate KYC responses with transaction monitoring. This combination makes it more convenient than ever to receive actionable alerts when a customer’s unusual transaction behaviour may involve a risk of money laundering.

Trapets offer expertise in setting up risk models within the platform and minimising your risk of being used for money laundering or terrorist financing whilst fulfilling regulatory requirements.

We also provide a unique Managed Service via our Financial Crime Surveillance team (FCS) for companies that would instead outsource their transaction monitoring to experts. We have witnessed a growing demand for this by FinTech and finance companies and other industries impacted by anti-money laundering and associated regulations.

Is your business prepared for the potential consequences of being audited? Have you implemented transaction monitoring yet? If so, how do you integrate transaction monitoring with your KYC process?

If you want to know more about integrating your KYC processes with transaction monitoring, automating your compliance processes, and reducing your workload, feel free to contact us!