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14 September 2022, 11:41


How to Perform a risk-based approach and fulfill regulatory requirements?


Asset managers and asset management firms must prioritize financial crime prevention and AML regulation. With stricter requirements and regulations globally, compliance is becoming more complex.

Many firms must improve their AML controls, customer due diligence, and enhanced due diligence. AML regulations require ongoing monitoring of business relationships and transactions.

For an asset manager AML Compliance doesnt need to be complex or time consuming. Many Asset Managers don’t report suspicious activities at all. As AML Regulation and has increased tremendously so has recent AML Requirements in most organisations.

Asset Managers are also required to assess whether their customers’ activities are consistent with the firm’s knowledge of that customer, and their risk profile, ensuring that CDD records are kept up to date accordingly.

And while anti money laundering (AML) is not jus a word it is a huge step for many organisations to adopt a risk based approach while performing Risk Assessments and improve their Risk Management. No matter if Customer KYC (Onboarding) or Transactions Monitoring and Ongoing Compliance due to Enhanced due diligence requirements. Financial crime is a field where Criminals aren’t sleeping and organisations need to apply a risk based approach.

Recently MAS Singapore has reviewed their strategic advice for Asset Managers how to Comply with AML Regulation.

Transactions Monitoring

Effective Transaction Monitoring enables asset managers to comply with law and detect and report suspicious transactions.

Nevertheless, at most asset managers, Transaction Monitoring still is performed manually by the compliance function and largely on an individual account basis.

Thus, Transaction Monitoring is still a challenge and an area of weakness.

Manual monitoring is associated with high effort for the Asset Managers and results also in a time consuming, inefficient manual task.

The type and level of sophistication of transaction monitoring systems and controls implemented by the Asset Manager (manual, automated, or semi-automated) is typically dependent on the nature, scale, and complexity of an Asset Manager’s business activities.

The timely review and investigation of transaction monitoring alerts, and recording the results of those investigations, are paramount to ensuring the effective operation of transaction monitoring systems and controls.

Therefore, transaction monitoring is in some cases carried out only once a month or quarterly as part of the asset manager AML task.

This is limited to the monthly reconciliation of the trading records with the bank’s records and a manual process.

Furthermore, no uniform rules are set by parameters or thresholds. These can identify unusual transactions with a reasonable degree of certainty about possible money laundering that warrants further investigation. And no frequency of reviews is adapted to the different risk profiles of their customers. Moreover, there is often a lack of overall 360 Customer view – most Asset managers do not monitor the transactions of multiple managed accounts owned by the same client/bank.

Transactions Monitoring can range from daily ‘real-time’ system-generated transaction monitoring alerts to retrospective transaction monitoring carried out manually. However, at most firms, transaction monitoring arrangements are poorly documented due to having no Transactions Monitoring in place.

What’s next

Assetmanagers should adopt Regtech to automate their manual processes.

While many Assetmanagers have already some sort of Techstack in place they need to upgrade it to make use of the latest technology in terms of AML Transactions Montoring and Customer Risk Assessments.

Our top Key Take Aways

  1. For an asset manager AML Compliance is much more efficient, if you establish an appropriate transaction monitoring framework, including risk-based parameters and thresholds, to promptly identify and report suspicious transactions. The parameters and thresholds should be reviewed regularly to ensure that they remain relevant and appropriate to the asset manager’s business and context.
  2. Get to know clients well, which provides the context to identify unusual transactions and evaluate whether clients’ activities or patterns of behaviour may be reasonable suspicion. This also includes, if necessary, asking the client about any abnormalities.
  3. Review the transactions of multiple managed accounts belonging to the same entity or a group of related managed accounts holistically, as the transactions may be structured in such a way that they are not detected.
  4. Review all transactions – inflows and outflows through clients’ managed accounts. Particular attention should also be paid to transactions involving third parties that are identified by custodians as potentially problematic and/or that are complex, large or show unusual patterns.

How DX Compliance can help

DX Compliance provides your organisation with a leading system for Transactions Monitoring. We helped many organisations including word leading asset managers to fulfill their AML Compliance obligation while using our Tech.

How CheckAML is helping asset managers ?

If you want to perform ad hoc and instant AML Checks and Risk Assessments, CheckAML can support you to perform CDD and EDD on your customer.

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