How ORBS is changing risk management for the AML/CFT industry
Within the world of anti-money laundering (AML) and countering the financing of terrorism (CFT), the risks are different for all but as equally detrimental.
A regulator has a responsibility to ensure that all entities within their jurisdiction are abiding by rigorous regulatory guidelines or else the regulator will face the consequences from intergovernmental organisations such as the Financial Action Task Force. These consequences we will get onto later within this article.
As a result of this top-down pressure, regulated entities feel the force from their regulator, undergoing frequent audits to ensure they have robust detection systems in place and are applying appropriate mitigating controls on an ongoing basis.
What hurdles do regulators face?
Within a jurisdiction, a regulator will have the responsibility of ensuring all of their entities are compliant with AML/CFT requirements but this takes a huge amount of time and resource. Conducting a risk assessment across every financial organisation takes months, and when one is finally completed, it is often time to begin the next risk assessment.
Countries or jurisdictions with serious strategic deficiencies to counter money laundering, terrorist financing, and proliferation financing will lead to them being added to the FATF’s list of Jurisdictions under Increased Monitoring, also referred to externally as the “grey list”.
Being placed on the grey list not only means that a country has committed to swiftly resolve the identified deficiencies within a set time frame, but it can also lead to difficulties for countries wishing to obtain credit, limit inward foreign investment and restrict cross-border transactions.
What consequences are there for regulated entities?
Non-compliance with AML regulations can lead to significant financial, legal, reputational, and operational consequences for financial institutions.
There are legal consequences, which include fines and penalties, legal action and lawsuits, license revocation, and even criminal charges if employees have wilfully violated AML laws or facilitated money laundering activities.
Not only are there legal repercussions to face in the aftermath of AML law violation, but reputational consequences, too. Public knowledge of AML violations can severely damage a institution’s reputation, leading to a loss of trust among customers and even investors. This might lead to customers withdrawing their business, leading to a significant loss of revenue, along with increased scrutiny from regulators, possibly facing more frequent and stricter audits and inspections.
Risk management as a preventative measure
Effective risk management is crucial for preventing the consequences associated with failing to comply with anti-money laundering regulations, both for financial institutions and regulators.
Conducting regular risk assessments to identify AML deficiencies is the obvious step forward in preventing the repercussions, but financial institutions need the time and resource, and regulators need to be able to trust their entities that they will carry them out. But these risk assessments are crucial for regulators to be able to identify which areas of their jurisdiction need the most attention – so where’s the middle ground?
Introducing ORBS
AML Analytics is now introducing Online Risk Based Systems (ORBS), a pioneering risk analytics, management and assessment solution for intelligent reporting and supervision.
The Risk Matrix within ORBS enables regulators to see the risk levels of all of their financial entities on one screen, whilst also providing a detailed breakdown of specific risk per entity.
A qualitative risk assessment
ORBS supports a qualitative risk assessment in the form of a request for information questionnaire (RFI). Each financial entity completes this questionnaire, providing regulators with real-time, online data gathering and risk score reporting, presenting both inherent and control risk for each individual entity within the entire sector.
It has been hailed by governments, regulators and supervised entities around the world as the only solution with the capabilities to facilitate a comprehensive AML/CFT risk assessment.
Sustainable supervision for regulators
ORBS provides full transparency for a regulator across its entire jurisdiction in one place, revolutionising data collection, reporting, repositories, risk identification, and risk assessment. This information will all be presented in the ORBS Risk Matrix; one single screen to help regulators gain quick, investigative insight across potentially hundreds, if not thousands, of regulated entities across industries.
This in turn benefits regulated entities, as through answering their risk assessment questionnaire, it highlights deficiencies in their AML/CFT regime, which allows regulators to notify them of the areas in which they need to improve thus driving up AML/CFT standards across the jurisdiction.
ORBS in practice
At the Central Banking Awards 2024, ORBS was given the award for the Best Risk Management Initiative, which is something we are particularly proud of especially as it is a nod towards the extensive work AML Analytics has done with Jamaica.
Since 2020 we have been working with Jamaica, using ORBS along with our other technologies, to assist their removal from the FATF’s list of Jurisdictions under Increased Monitoring, also known as the grey list.
Earlier this year at a FATF Plenary meeting, after four years on the grey list, it was announced that Jamaica has been removed. It was said at the awards that “an important element of Jamaica’s improving situation is due to the work AML Analytics has undertaken.”