Since the financial crisis in the late 2000s, the only steady area of job growth in the US financial services has been in legal, compliance and risk disciplines. As Wall Street has cut jobs in virtually every other area, the need for compliance grew in part due to the wave of new rules and regulations in the aftermath of the crisis. A chronic lack of investment in financial crime systems and processes meant that legacy systems needed to be developed, implemented and sustained to meet increased compliance obligations. Of late, this has been coupled with an advancement in technology and greater regulatory change through the EU’s Fifth Anti-Money Laundering Directive (5AMLD) and the looming potential of ‘Tranche 2’ in Australia. These events will see an ongoing demand for financial crime skills in an already restricted job market.
With the backdrop of ongoing uncertainty around Brexit and a need to ensure financial crime requirements for regulated firms remains current, 5AMLD has gone some way to addressing this. However, there will be an increasing number of regulated firms with the addition of virtual currency platforms and wallet providers, tax-related services and traders of art. This, coupled with further requirements to consult beneficial ownership registers and enhanced due diligence in respect of high-risk third countries, will add greater complexity to customer due diligence procedures. With a number of financial institutions moving operations out of the UK in response to Brexit, the access to existing AML capability is being tested. 5AMLD presents both a challenge and an opportunity for regulated firms to reassess their systems and processes. Early planning and identifying appropriate resources to deliver these changes will be essential to ongoing compliance.
The Australian Labor Party has recently made the addition of lawyers, accountants and real estate professionals to the AML/CTF Act a pillar of their election platform. Currently, with 14,000 reporting entities this change would result in over 100,000 reporting entities. This dramatic increase coupled with a relatively quick implementation will greatly test the existing AML expertise base and could potentially present a risk of non-compliance. Central to this is the fact that many people with financial crime compliance expertise are already employed to address issues arising out of the Commonwealth Bank APRA Report, as well as the implications of the Hayne Royal Commission. With recent increased restrictions around visas, there is also reduced flexibility in accessing international skills. It is therefore essential that both current and potentially regulated entities begin considering these changes early and seek appropriate expertise with experience, both locally and internationally, in AML compliance.
What is the next step?
With a tightening in the employment market for financial crime skills and with no respite in increased regulation we suggest
- Focus on complementing financial crime compliance expertise with other disciplines – While financial crime compliance expertise is lean, implementation of new processes and systems can be effectively complemented with individuals with project management, information technology and data analytics skills, as well as those in customer facing roles. Entities often make the incorrect assumption that to address financial crime risk, each member of the team needs direct AML, anti-bribery and corruption or international sanctions expertise. Instead having a diverse team, with existing knowledge of your business and a range of skill sets, can best achieve compliance by being able to harness technology and create operational efficiency.
- Invest in training – The old adage that people are your greatest asset remains true. Addressing financial crime requires people in all roles, but specifically those involved in financial transactions, procurement, legal and front line to identify and escalate any suspicions. Providing both eCourses and face-to-face person training remains a good first step, but it needs to be targeted and specific to the nature of your business. With increasing regulatory change, such as 5AMLD, all AML training programmes need to be assessed to remain current.
- Seek external expertise early – It is an unfortunate reality that many regulated entities only ask for assistance when a problem arises and remediation is required. To ensure an effective compliance programme, take the proactive step of seeking initial advice or seconding in expertise for a particular project – using a financial crime expert to identify potential legal, regulatory or system issues from the outset can save a significant amount of time and money and achieve excellent results in the long term. Additionally, the ability of trusted advisers to guide and mentor existing employees can create a breadth and depth of experience that goes beyond short term objectives to reduce risk on an ongoing basis.