RegTech in the AML area
RegTech or regulatory technology solutions allow financial institutions to automate processes and accomplish them within a shorter time span. RegTech solutions contribute to more effective management of money laundering, terrorism financing and sanctions risks, and give financial institutions the opportunity to obtain high-quality data.
Please take a look at particular areas of RegTech solutions and refer to the FCMC if you are planning to develop an IT solution in any of these areas and need FCMC’s expert advice.
Possible IT solutions in the AML area
An IT solution for the development of money laundering and terrorist financing risk scoring system. This IT solution, using a variety of ML/TF risk factors and features, helps a financial institution determine the risk level of its customer.
An IT solution that provides the screening of financial institution customers and related persons (e.g., beneficial owners, officials, authorised persons), counterparties and transaction (payment) details against data on politically exposed persons and sanctions lists.
An IT solution which ensures the monitoring of transactions and customer behaviour using current and backward information on customers and transactions performed at the disposal of financial institution.
An IT solution that gives the financial institutions the possibility of remote customer identification. This IT solution may include video identification, the use of biometric parameters or other technological solutions.
An IT solution that helps financial institutions systematically search for publicly available information on customers or co-partners.
This IT solution allows financial institutions to identify adverse information on existing and potential customers and protect themselves against the money laundering and terrorism financing risks in the event of the initiation of relations with an unsolicited customer or a bad repute counterparty, and to decide on future business relations with an existing customer if adverse information is identified during business relations.
In addition to the above areas, where various RegTech solutions are used and developed, the FCMC highlights the following areas as further development directions for RegTech.
Joint customer due diligence tool
In order to ensure more efficient customer and transaction due diligence and to meet the requirements of the Know Your Customer principle, financial institutions may use the joint customer due diligence tool since 2022. It is a solution or solutions which centralizes the collection, verification, storage and sharing of customer data and documents in order to support responsible institutions by carrying out statutory customer due diligence duties.
The joint customer due diligence tool reduces the administrative burden on financial institutions and minimizes the resources needed to meet the requirements for anti-money laundering and combating terrorism financing.
The joint customer due diligence tool is an innovative regulatory solution which is licensed and supervised by the State Data Inspectorate for the processing of personal data. The types and procedures for the joint customer due diligence tool are set out in the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing.
Identification of group of connected customers
Financial institutions may use a tool for a group of connected customers to identify customers who are likely to form a group of connected customers. The identification of a group of connected customers is particularly important in cases of increased ML/TF risks.
The tool for identifying a group of connected customers allows a financial institution to assess the transaction scheme as a whole, thereby ensuring a more comprehensive assessment of the transactions carried out and the possibility of detecting a suspicious transaction.
Identification of circumventing sanctions requirements and terrorism financing risks
Financial institutions may use tools that identify the circumvention of sanctions requirements, as well as the terrorism and proliferation financing risks. Typologies of sanctions circumvention and terrorism and proliferation financing risks differ significantly from the typology of money laundering and are difficult to identify through the standard transaction and customer behaviour screening systems. Improvements are needed to enable the transaction and customer behaviour screening systems to recognise also the circumvention of sanctions requirements and typologies of terrorism and proliferation financing and to adequately generate alerts on individuals and/or transactions that require additional due diligence and analysis in the field of non-compliance with or circumvention of sanctions requirements.
In the field of compliance, financial institutions should choose, implement and use the technological solutions according to the size and specificity of their business and in compliance with the laws and regulations in the area of AML/CTF.
Consultation with FCMC experts
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