Remote working presented significant challenges for anti-money laundering (AML) compliance, from managing the logistics of carrying out client due diligence (CDD) to keeping up with new risks posed by the COVID-19 response. To meet these challenges, many firms had to change how they worked, introduce new policies and procedures, and alter how they communicated with, or trained, their staff.
The move back to on-site working may seem less of a challenge. But the changes associated with the pandemic – from new ways of working to shifting risk perspectives – mean that going back to the office needs to be much more than simply a return to ‘business as usual’.
What do money laundering reporting officers (MLROs) need to be thinking about as staff come back to on-site environments and start meeting clients face-to-face again? Can they use this opportunity to reinforce their firms’ AML culture and embed professional scepticism? And what can they do to support their colleagues?
Fit for purpose
“For MLROs this is a good opportunity to think about the working practices in their firms and whether there are any changes they want to make to the culture or the way in which people are doing things,” advises Michelle Giddings, Head of AML, Professional Standards, ICAEW.
“Perhaps the first thing to do is to review policies and procedures, and make sure they are up-to-date in the context of all the changes over the past year and a half,” she says. “As firms have changed their working environment, they may have changed their working practices. For example, are there things that staff stopped doing to adapt to the new working reality that now need putting back in place?”
“In terms of training, having people back on-site together means you can also update their understanding of AML risk,” she suggests. “Many firms will have continued AML training over the last 18 months by taking it online. But if you haven’t been able to talk through real life case studies, to share experiences and knowledge, it can be very difficult for that to properly embed itself, and for people to understand the practical application of it.”
“This is also a good opportunity to do a thorough compliance review,” she says. “This might involve digging into client files and making sure everyone has done all the checks they should have done, and that nothing has fallen down the cracks.”
Back to face-to-face
Some firms may have continued to have staff working on-site, but they might still not have been meeting with their clients. “Meeting the client is a really important aspect of reducing AML risk,” explains Sandy Price, AML Manager, Professional Standards, ICAEW. “And that’s something people have rarely been able to do over the last 18 months.”
MLROs need to check-in with staff to make sure they still feel confident going out and talking to clients and asking the kinds of questions they would have been asking pre-pandemic. “It might seem like back to basics – do they remember how to interview clients, do they still know what type of information they want to see?” says Giddings. “But it might be that over the last year and a half they’ve got used to working with different pieces of information.”
When firms couldn’t see clients face-to-face, they may have changed how they carried out their CDD, for example by carrying out additional or unusual checks. “So they might need to consider whether they are actually now doing too much,” suggests Giddings. “And whether, because they’re meeting clients again, they can reduce the extra AML checks they introduced.”
On the flipside, there could be some useful new practices to embrace. “If a firm had invested in electronic verification to see them through this period and had adapted their policies and procedures to that, there’s no reason for them to go back,” she adds.
“Things are also likely to have changed with the clients themselves,” emphasises Price. “Be it the environment they work in or the way they’re trading – and if firms have not been out visiting clients, they may not necessarily have picked up on those. So it’s important to check there haven’t been any significant adjustments in who owns the company, who the key players are, and the kinds of business activities they’re undertaking.”
Refreshing the risk perspective
Because the last 18 months have seen a significant increase in fraud relating to the COVID-19 response, it’s also important to make sure staff are aware of that and are communicating with clients about these issues.
“Client-facing staff coming back to work on-site are going to be very focused, for example on getting accounts completed, so it’s a good time for MLROs to be reminding them of the current risks,” says Price. “The MLRO can stand back and bring in the AML perspective, so for example they could be talking to audit teams about making sure they’re asking more questions around things like Bounce Back Loans and furlough payments. They should be reminding staff that risks have changed during the pandemic, and advising them on how to pick up on those.”
Another issue they should be talking about, and which was raised in the UK government’s 2020 National Risk Assessment, is that organised criminals may try to exploit businesses in financial difficulties. “If some clients are having cash flow problems as furlough ends and Bounce Back Loans start to require repayment, this could put them at risk,” warns Price. “So firms need to be thinking about which clients could potentially be in this position.”
No roll back
For MRLOs and their firms, the return to office-based working provides what might seem like an unexpected opportunity to stand back, take stock and refresh policies and procedures. “There might be some really good practice that has come out of the pandemic, so it’s not about rolling the clock back on everything,” concludes Giddings.
“It’s about making sure that, where things were amended to adapt to the unusual situation, those that are less effective or less productive are reviewed, reflected on, and changed back where necessary. But where the changes may be actually more effective and practical, they are adopted and built on.”
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