19 August 2019
We need to redesign the anti-money laundering system through wider collaboration between finance institution
The anti-money-laundering (AML) system in Europe needs to be fixed. Over the past year, Europe has been alarmed by a series of reports about how there is insufficient control over money laundering activities. The unveilings came from countries such as the Netherlands, Denmark, Latvia and Sweden. In some cases this even resulted in enormous fines.
Last week, another bank came into disrepute: the Dutch bank ABN Amro is obliged to improve its anti-money laundering policy as soon as possible, according to the Dutch Central Bank (DNB). ABN Amro should screen its five million existing customers better because, according to the DNB, the bank has insufficient insight into customer files. ABN Amro has agreed to improve the monitoring of money laundering by spending 114 million euros on the issue.
Know Your Customers
These examples show that the banks do not always have an oversight of their customer files. The detection of possible money laundering is currently done via programs such as Know Your Customers (KYC), software that helps detecting suspicious transactions or remarkable cash flows.
However, many banks have difficulties with risk assessments, customer background checks and the reporting of suspicious transactions. In practice, it is difficult to detect money laundering because of the lack of collaboration at both national and European level. Banks should share their information sufficiently outside their own corporate walls as criminals are becoming increasingly sophisticated by channeling their money through different banks and European countries.
In addition, the emergence of online banks and new payment solutions and features makes regulation even more difficult, because the possibilities for criminals are infinitely increasing. Nowadays, for example, you don't have to physically go to a bank to open an account, because in many cases this can be done digitally. Furthermore, the chance of getting caught is smaller because it is becoming increasingly easy to send pan-European transactions from one account to another in real time.
European directives on how to deal with money laundering do exist, but EU countries interpret them all in different ways. As a result, the directives are applied differently and therefore not always effectively followed up by the member states. There is lack of consistency, so to say, and besides that, there is a need for more collaboration at both national and European level. Not only to share information, but also to exchange knowledge and experiences.
That is why it is important to create consistency. This can be done by creating a European approach to money laundering, with clear rules instead of directives that everyone in Europe must comply with.
In order to stimulate collaboration, we need to redesign anti-fraud policy and monitoring. Banks and governments must be involved in this process, but also other players in the chain. In short; there must be broader collaboration. That is why payment processors, payment facilitators, terminal vendors and third party fintechs should also be involved in a large-scale collaboration.
Different payment solutions
Broad collaboration is crucial as more and more payment methods and parties enter the finance world. If I look at ourselves: as a payment processor we process enormous amounts of transactions that could help with fraud detection. While banks can mainly check payment accounts or payment cards, equensWorldline is able to track transactions from different payment solutions, such as instant payments, mobile payments or payments with Ideal.
The fact that we process huge amounts of transactions from both consumers and retailers via different payment types can serve as an extra weapon for the detection of fraud in the future. If banks and other financial institutions that are subject to regulation fill a database with useful information, it will be a lot easier to map out suspicious behavior.
This requires a uniform approach and more collaboration, especially now that the payment landscape is changing drastically. After all, we all earn our money with electronic payments. Collaboration will only increase people's trust in the system.