The Time Has Come to Automate Anti-Money Laundering Systems

The last year has been a wake-up call for businesses and consumers alike. Not only are we now doing our grocery shopping and doctor’s visits online, the days of going to your local credit union to deposit checks are a bit more complicated than they were just a year ago.

The pandemic has pushed the digitalization of some of our daily tasks into overdrive, in some cases leaving us open to greater risk. Unfortunately, as the technology we use for simple tasks advances, so do the technical skills of criminals. Credit unions need to be prepared to securely onboard members remotely, and securely safeguard themselves from identity fraud and money laundering.

Manual Is Not Always Best

Many credit unions are accustomed to relying on manual ID checks when onboarding new members and processing loan applications. The problem with this process is that these documents are far too easy to fake. The pandemic has heightened this risk by forcing many financial institutions to forgo in-person applications and turn to virtual ones. One method of enhancing protections at financial institutions is moving from a manual process to electronic verification, which is nearly impossible to fake. What was previously an arduous manual process of identity verification will be automated for more efficiency and accuracy.

Another great benefit of moving to electronic verification is that the onboarding process can be done remotely. For those members still wary of entering a physical branch, this is just as physically safe to bring on a new member as it is safe against fraud. Electronic verification goes well beyond onboarding – it can provide an alert if anything changes with the member’s background and allow the credit union to take action, if needed. Something as simple as an address change would prompt an alert – not only will this keep regulators at bay, it helps build a better connection to the member when you are aware of their change in circumstances.

Buckle Up for New AML Legislation Implementation

Credit unions have been required to “Know Your Member” since the ’90s, but the Anti-Money Laundering Act passed in 2020 has the potential to significantly change compliance-related processes for lenders. As if you needed another reason to digitize, here is another. On Jan. 1, 2021, Congress passed the National Defense Authorization Act (NDAA) for Fiscal Year 2021. NDAA includes the most substantial and sweeping legislative reforms to U.S. anti-money laundering (AML) and counter-terrorism financing (CFT) laws since the USA Patriot Act of 2001. The NDAA introduces AML/CFT amendments and enhancements under Anti-Money Laundering Act of 2020 (AMLA).

While the AMLA brings relief from an industry that has long requested improvements to the Anti-AML rules, it also brings with it challenges. Stricter reporting requirements, along with more severe consequences for non-compliance will likely push financial institutions toward technology that they have been resisting up until this point. This isn’t a bad thing; it just brings with it change.

U.S. regulators will be focused on prevention, detection and prosecution of violations, which will require financial institutions to be more prepared to collect, verify and defend their processes. Many financial institutions are turning to AML platforms to complete their AML checks – one more way to add automation to a cumbersome process. AML verification systems allow financial institutions to use one platform to complete all anti-money laundering checks and searches, validating documents and making electronic identification verification. These systems are not only more efficient, they are also more reliable as they can match documents with major data suppliers like Experian, Equifax and Dow Jones, simultaneously.

Now Is the Time to Automate

The saying “There is no time like the present” certainly would apply here! Not only will the new AMLA legislation make it more beneficial to automate wherever possible, part of the act will focus on “encouraging and supporting” innovation and “reducing obstacles” to technological innovation. This is sure to increase technology advancements for the entire industry. Now is the time to move forward from outdated processes and create efficiency where you can in order to be prepared for the guaranteed change the AMLA will bring over the long term. The U.S. has made combatting financial crimes a priority and will surely require more of credit unions in the future – automation is key to keeping up!

Chad Rawlings is National Sales Director for SmartSearch US, a provider of an Anti-Money Laundering verification service based in Lehi, Utah.