Why anti-money laundering needs to be a boardroom issue.

When you think of money laundering, you may picture an underworld of hidden criminals doing dark deeds. You may also think of the real world consequences, which can result in the exploitation of vulnerable people across the globe. Clearly, our collective goal needs to be disrupting the flow of dirty money wherever possible. With such high stakes, surely the C-suite is prioritising anti-money (AML) strategies to ensure lasting change?

However, recent findings challenge this belief. A recent poll of c-suite executives (UK and ANZ) found that almost everyone (99%) surveyed was worried about their company’s ability to be compliant in the future (with new and upcoming AML regulations). In fact, half (49%) of the executives polled were not even that confident about how compliant they are now. 

There’s a clear apprehension surrounding non-compliance, and yet despite this in many organisations AML budgets are also being cut.

There’s a clear apprehension surrounding non-compliance, and yet despite this in many organisations AML budgets are also being cut. So why is there a major C-suite confidence crisis? And, most importantly, what are the crucial steps that executives must take to build back confidence in themselves and their team?

Where responsibility for non-compliance lies. 

When it comes to AML, the Money Laundering Reporting Officer (MLRO) or AMLCO assumes a pivotal role. Tasked with reporting potential instances of money laundering and suspicious activities/individuals to regulatory bodies, the MLRO's mandate is clear. But do they, and should they, carry the full responsibility for non-compliance? They are of course best placed to spot issues with compliance processes, and can outline these findings to senior management, alongside any recommendations for making improvements. But if management doesn't take action, it is the MLRO who often acts as the scapegoat.

This personal accountability is one of a number of reasons as to why companies have high churn rates with MLROs. And it highlights why, in reality, AML responsibility sits at the top. 

Why AML should be a boardroom issue.

Just as organisational culture is nurtured by management, so too is a company’s compliance culture. How the C-suite manages compliance has a direct effect on how the wider company and its employees do so. If they show more of a disregard for compliance, then this will spread amongst employees. Likewise, if they haven’t set up and publicised appropriate communication channels and reporting processes, then even if an employee wants to flag a red flag, it is much harder for them to do so. 

How the C-suite manages compliance has a direct effect on how the wider company and its employees do so.

Compliance also has a direct impact on a brand’s reputation, client relationships and financial penalties, all of which necessitate action from the C-suite. Management has the greatest oversight of resources and can therefore most effectively understand where their compliance strategy might be falling short and allocate resources accordingly. Most importantly, if the C-suite shows a desire to prioritise compliance, they are illustrating to their employees, regulators, other businesses and the public that they are committed to stamping out money laundering.

How the C-suite can build back compliance confidence.

Having said all of this, without the right tools and technology, compliance can be a time-consuming and complex process to get right. The modern, digital world has an increasing number of money laundering methods, such as using crypto and AI, for bad actors to take advantage of. What’s more, regulations can differ from region to region and are regularly reviewed and updated. Even with a desire to be compliant, this ever-changing landscape can feel like an uphill struggle to get on top of and put a dent in the C-suite’s confidence to effectively manage compliance. So, how can management feel and be more confident? 

A strategic starting point lies in leveraging technology. Integrating AML software creates immediate business value, streamlining the compliance process and allowing employees to easily spot and report any red flag activity. But technology doesn’t work to its best without the culture and processes to go with it. This requires a mindset shift by the C-suite to view compliance as integral to operations, not a resource that can be dispensed with. MLROs need adequate budgets and space to be able to run their compliance function more effectively and efficiently, directly dealing with requests from frontline staff and accessing resources to make any enhancements to compliance controls. The C-suite could also take on a shared responsibility with the MLRO, or give them the trust and freedom to independently implement changes. 

If management doesn't take action on compliance recommendations, it is the MLRO who often acts as the scapegoat.

Step by step, each change produces a better working practice and results, thereby building confidence internally as well as more confidence from regulators in a firm’s compliance strategy. 

With confidence comes results.

When confidence takes a knock, processes can quickly unravel, making it challenging to regain stability. And in the face of adversity, compliance budgets can often be cut. But the consequences of non-compliance are dire—ranging from hefty fines to enabling criminals to unfairly access markets and profit from heinous crimes. This is why AML requires the attention of the boardroom.

If the C-suite prioritises compliance, it sets an example for the rest of the company. And by taking steps to enhance the role of the MLRO, secure AML budgets, integrate technology and encourage open communication, it can (re)instil compliance confidence from the top down. Above all, a more confident compliance strategy means less confident money launderers.