It’s the start of a new decade and already we’ve seen significant regulatory change happening across continents.
The EU has implemented 5AMLD across the Member States and the USA has been keen to wield sanctions with impunity. Most of this change is in pursuit of stronger anti-money laundering controls, some is an issue of politics, but all of it is vital for informing how compliance teams need to function in 2020.
Next week we will be releasing our 2020 Global Compliance Report covering:
Sanctions are set to be used increasingly as a tool of ‘first resort’ by the current US administration. It’s following the tone set over the previous few years which has seen the White House take a sanctions-first approach to deal with political issues in the Middle East, East Asia and other territories around the globe.
All of this is bound to have a considerable fallout and could make some challenge to US dollar financial hegemony as the EU begins to follow China by seeking alternatives and workaround to the US approach.
We’ll take a look at how money laundering techniques will continue to rapidly evolve. Just as AML techniques develop using new technology so too will the criminals seeking to exploit the financial system.
Money laundering techniques will increasingly involve sophisticated use of new technology and the exploitation of vulnerable demographics. The nexus with cybercrime will strengthen and the flow of criminal funds into western major housing markets is likely to spread to a wider range of cities and countries.
Regulatory changes may be being made but that doesn’t solve the problem. The AML framework will struggle with sweeping social and technological changes, such as the growth of legal cannabis and the rise of virtual assets (VA).
The EU will be slow but probably consistent to adapt to VAs, while the Asia-Pacific remains agile but diverse and the US will be rhetorically ambitious but fragmented in practice.
What remains to be seen is how the continuing VA industry will react to legislation. Those who were unwilling to take the steps towards compliance have already disbanded, those who are compliant will undoubtedly have strong messages to bring to regulators.
Financial institutions (FIs) will work ever more closely with regulators to harness the potential applications of technology in the regulatory market (regtech), especially Machine learning.
Some new technologies have the potential to bring real change to the regulatory market and are key to making sure that companies are capable of meeting regulatory minimums.
2020 is shaping up to be a year of deepening engagement, where “partnership” will be a strong theme, especially between the public and private sectors.
A new decade means new trends. It’s likely to be most visible among fintechs which are able to take a more agile approach and are moving out of sandboxes and into the big bad world of fully regulated entities.
Compliance costs are likely to stay high for the biggest FIs, as the implementation of structural and technological change only slowly takes effect. These costs may decrease if they’re able to take advantage of the benefits that regtechs can bring and it will be interesting to see how those relationships take shape.
All of these issues matter as we move into a new decade and focus on how the regulatory landscape as a whole will change in a truly digital economy. The power of new technologies and developing criminal activity mean that the regulatory industry has a chance to make an impact on financial crime and tackling it with real effect