Financial institutions (FIs) are expected to deliver instant transactions, immediate verifications and fast onboarding in a world that has shifted towards real-time payments.
Bradley Elliott, CEO of RelyComply
The ability to process online payments in real time rests upon a trusted, collaborative infrastructure for compliance with anti-money laundering (AML) laws and regulations.
The road towards this level of ecosystem-wide cooperation is not easy. The rise of innovative digital native neobanks and fintechs, along with demands to increase financial inclusion, have complicated regulators’ efforts to standardise AML frameworks to accommodate a range of sectoral and regional differences.
For FIs that are embarking on cross-border mergers and acquisitions (M&As), the AML scaffolding is thus one of the areas that requires the closest attention in due diligence and beyond. As they integrate operations, merging institutions must unite their AML frameworks in such a way that neither speed of transactions nor compliance are compromised.
This may be further complicated by the need to integrate slow, disparate legacy systems and to balance different regional risks and regulations, especially in high-alert nations. A kink in the armour of one side or its subsidiaries could expose the entire business to severe reputational and regulatory risks in the event of a fincrime.
Managing necessary integrations
After a merger, the hard work of integrating AML systems can commence. This can pose a range of technical and organisational challenges. Different cultures and attitudes to compliance may cause discord. And integrating AML setups can be complex and expensive when both parties have bespoke risk-based solutions spanning different jurisdictions.
For most institutions, leaving AML systems and processes in the same state is not a viable option. Separate AML systems house data across different regions, where misalignment exacerbates manual work, investigative error, costly repeated workflows and false positive rates.
Without a shared Anti-Financial Crime (AFC) foundation, compliance will remain a patchwork of fixes and a constant process of firefighting, rather than a unified process across know your customer/business (KYC/B) checks at the onboarding stage, through to ongoing transaction monitoring and screening, regulatory reporting and fraud.
For real-time risk management and reporting, data-sharing gaps must be closed not just within newly acquired businesses but across the wider financial ecosystem – including regulators, government agencies, FIs, and vendors. This requires building a connected infrastructure that supports secure AML data use while staying fully compliant with regional data privacy laws.
Technology to build trust
Compliance and customer buy-in goes hand in hand. FI acquisitions that do not account for the merged entity’s KYC, data transparency and transaction monitoring risk undermining customer trust. But on the flipside, an integrated FI with sound historical reputation, capital and regulatory oversight can become a strong cross-border player.
Modern AML platforms have a valuable role to play in this environment. Data-centric technology bridges and unites different strands of the ecosystem and helps institutions to comply with complex AML compliance requirements. This enables FIs to maintain reputation and integrity.
FIs that partner with end-to-end AML/KYC providers can therefore not only streamline compliance today; but also position themselves for future M&A transactions and business expansion. A flexible platform will accommodate AML according to shifting operational models as the business evolves.
In the case of M&A, technology can empower the merging institutions to account for identity and transaction checks, protect customer data and support great digital experiences, even in a transitional period. It provides a connected financial infrastructure that facilitates sharing of expertise and data across merged businesses, across borders.
Partnering with a single platform ensures that each parties’ systems and customer data are synchronised and continuously monitor for fincrime threat amongst higher-volume datasets both during and after integration. This instils a healthy AML infrastructure while other M&A considerations can be adopted successfully.