Regulatory Changes
Throughout 2020, the financial sector saw a number of changes - including regulatory change. Whilst the year had its fair share of bad press around the adoption of regulation, there were also a number of positives to come out of 2020. The implementation of the Fifth Anti-Money Laundering Directive (5AMLD) at the start of the year and the newly updated UK National Risk Assessment were long awaited updates that will help to drive positive change within the financial sector and beyond.
Fifth Anti-Money Laundering Directive
The 5AMLD came into force on January 10th 2020. The directive brought a number of changes, which now applied to firms that were previously unregulated. The 5AMLD now covers cryptocurrency firms, high value dealers (anything over 10,000 euro), and estate agencies. In 2020, cryptocurrency firms started to bolster and refine their anti-financial crime frameworks - a sure result of 5AMLD.
UK National Risk Assessment
Towards the end of the year the UK released it’s 2020 National Risk Assessment - an update on the 2017 Risk Assessment. The changes (highlighted in our December 2020 RegCap) included a number of increased risk levels for some specific industries such as property and trust/company service providers. The assessment also included initial ratings of newly regulated sectors such as estate agents. No areas saw their risk levels lowered, either for money laundering or terrorist financing.
FINTRAIL Projects: Europe
Whilst the year wasn’t quite as many had planned, we at FINTRAIL continued to work with our global client base to deliver the best of anti-financial crime consultancy. The year saw us work on a number of different projects, from risk assessments to creating due diligence policies. Two areas that increased in popularity this year were audits and training.
Audits often get a bad reputation. They are a regulatory requirement and often seen as a burden. However, these can be extremely useful tools and help to shape and prioritise the year ahead for your anti-financial crime function. We conducted several audits in 2020, from a crypto firm’s first audit to working with a challenger bank who is well versed in the audit process.
Firms have also looked to either increase their knowledge or change the way they are learning and conducting training. Despite the challenges of working from home, FINTRAIL delivered bespoke, specialist training - albeit from behind a screen. This appetite for training stretched across most companies with an increase in requests for training of more junior members of staff as well as the more senior compliance employees. RegTechs also requested training in 2020, to ensure their sales teams were attuned to the latest regulations; understand where their product fits into their potential clients’ lives; and were aware of the problems it solves. Alongside RegTech partners, our clients within the training space in 2020 included challenger banks, crypto firms and law enforcement agencies to name a few. This trend for increased training is likely to continue into 2021.
Another highlight of the year was conducting work in the investigations space. One particularly interesting project included a due diligence review and evaluation of the specific risks posed by a particularly high-risk client. FINTRAIL also assessed the current control measures in place and offered suggestions for enhancements to the financial crime control framework to mitigate the risk further.
Part of 2020 was also spent leading a major transformation project within a bank's anti-financial crime function. This large scale project was great to work on, as it involved delivering various pieces of work from an enterprise wide risk assessment to customer due diligence policies, right the way through to the training programme for its employees. FINTRAIL successfully helped to shape a more effective compliance framework for the bank, entirely through remote delivery.
Looking to the future
Entering into 2021, we look forward to working with our existing and any new clients that the year may bring. There are already early signs that the year could be an eventful one, with rapidly changing crypto regulation through to Brexit finally being realised. 2021 is sure to bring its challenges - and opportunities.