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Asia AML/CFT 2nd Annual Summit 2020 – Key Takeaways

Fintelekt’s Asia AML/CFT 2nd Annual Summit 2020 was held virtually from July 20-24, 2020. The summit concluded with more than 1200 participants joining in from 48 countries in Asia and beyond.

Global AML/CFT experts shared their knowledge and insights with participants over the five days of the summit. A variety of topics pertaining to AML/CFT and financial crime were discussed, with the Covid-19 pandemic and its impact being the underlying theme through the discussions.

Some of the key themes/ takeaways from the summit were as follows:

1. The impact of the Covid-19 pandemic on AML/CFT

The keynote address for the Summit was delivered by Mr. Abu Hena Mohd Razee Hassan, Co-chair Asia Pacific Group on Money Laundering (APGML) and Head – Bangladesh Financial Intelligence Unit (BFIU).

Mr. Hassan alerted participants to new risks and vulnerabilities during the Covid-19 pandemic and provided instances of responses by FIUs of several countries, including encouraging the use of digital identity and simplified due diligence in line with FATF recommendations.

I would like to emphasize that in the evolving new environment, financial institutions need to prioritize their AML/CFT efforts and focus on prudential stability measures. To respond to the challenges, domestic co-ordination, strong co-ordination with the private sector and international collaborative efforts will be integral.

– Abu Hena Md. Razee Hassan, Co-chair APGML and Head – Bangladesh FIU

On the impact of Covid-19 on financial institutions, Jermy Prenio, Senior Advisor, Financial Stability Institute, Bank for International Settlements said in his presentation that the Covid-19 experience will most likely accelerate the trend towards digitalisation of financial services. He also added that the current situation demands an enhanced focus on cyber resilience and AML by financial institutions.

Jermy Prenio, Senior Advisor, Financial Stability Institute, Bank for International Settlements

2. Regulators are demanding greater effectiveness

Regulators are expecting greater effectiveness in the AML/CFT process on the basis of outcomes and not just outputs. Hari Kumar Nepal, Deputy Director, Nepal Rastra Bank & AML Cell, Ministry of Finance Nepal strongly advocated a risk-based approach to AML/CFT by financial institutions and a culture of compliance that is promoted by the top management.

If a financial institution follows a risk-based approach is followed, and submits timely STRs that are useful to the FIU and LEAs, we can say that the system is providing results and is ‘effective’.”

– Hari Kumar Nepal, Deputy Director, Nepal Rastra Bank & AML Cell, Ministry of Finance Nepal

Supranee Satitchaicharoen, Director of International Cooperation Division, Anti-Money Laundering Office, Thailand emphasized that to improve the effectiveness and quality of STRs, reporting entities must improve transaction analytic skills, ensure effective resource allocation and focus on up-to-date IT systems and software to support compliance. From the perspective of FIUs, the important elements are regular outreach, dissemination of knowledge, feedback and communication.

Supranee Satitchaicharoen, Director of International Cooperation Division, Anti-Money Laundering Office, Thailand

How should banks and financial institutions prepare to meet changing regulatory expectations? Shirish Pathak, Managing Director, Fintelekt Advisory Services recommends a three-pronged approach starting with really understanding the implications, continuously reviewing the framework for risk identification, assessment, reporting and governance, and communicating proactively with regulators.

Shirish Pathak, Managing Director, Fintelekt Advisory Services speaking on how banks should prepare to deal with regulatory expectations

3. Financial Intelligence/Informing Sharing Partnerships (FISPs) coming of age

Mariano Federici, Vice President, K2 Intelligence, Financial Integrity Network explained how Financial intelligence/information sharing partnerships (FISPs) allow public private dialogue on financial crime threats towards building a common understanding of risks, threats and vulnerabilities affecting the national AML/CFT system.

FISPs aim to develop better typologies and red flag indicators and can help to advance investigations and share operational intelligence for more effective ongoing investigations. Overall, they can enhance the quality of reporting, improve the expertise of all involved partners and provide more agility to respond to the fast changing ML/TF threat environment.

Mariano Federici, Vice President, K2 Intelligence, Financial Integrity Network

4. AML risks from digital assets

Russell Wilson, Non-Executive Director, Transparency International Australia, Special Counsel Maddocks & Former General Counsel, AUSTRAC spoke on the theme of AMl risks from virtual assets. Virtual assets and related regulatory expectations are evolving differently in different countries. The instant, non face-to-face, cross-jurisdictional character and pseudonymity makes virtual asset transactions risky from an AML/CFT perspective. The FATF once again advocates a risk-based approach when assessing the risks associated for regulators as well as financial institutions. In particular the guidance states that Virtual Asset Service Providers (VASPs) that engage in virtual asset transactions should obtain, hold and maintain customer information. Where the transaction is riskier, enhanced due diligence is recommended. Going forward, countries should have in place relevant channels for sharing information to support the identification and sanctioning of unlicensed/unregistered virtual asset service providers to mitigate risks.

The lack of visibility of virtual asset transaction data due to the inability to identify the underlying parties to the transaction is a fundamental, systemic challenge to the application of a traditional compliance framework.

– Russell Wilson, Non-Executive Director, Transparency International Australia, Special Counsel Maddocks & Former General Counsel, AUSTRAC


5. A case for investing in Digital Identities

Hala Bou Alwan, Founder & CEO, HBA Consultancy provided a run-down on recent FATF guidelines around countering terrorist financing, ultimate beneficial ownership, illegal wildlife trade, virtual assets, digital identity and risk-based approach. Hala further explained that leveraging the use of digital identity through a risk-based approach has a number of benefits including facilitating customer due diligence measures, aiding transaction monitoring and moving towards greater financial inclusion.

Hala Bou Alwan, Founder & CEO, HBA Consultancy speaking about the benefits of a digital ID

6. Counter Terrorism Financing responses need strengthening

Tom Keatinge, Director, Centre for Financial Crime and Security Studies, Royal United Services Institute (RUSI) stressed that the role of financial intelligence in countering terrorism financing has been underemphasised and guidelines by the UNSC and FATF remain poorly implemented and are currently ‘one-dimensional’.

Tom Keatinge, Director, Centre for Financial Crime and Security Studies, Royal United Services Institute (RUSI) speaking on why current CTF responses are ‘one-dimensional’

Tom recommends that financial instutitions adequately assess terrorism financing risks and tailor CFT responses to the appropriate risk assessment. Ultimately, there is a need to move to a more sophisticated global framework for combating CFT and the use of finance and related intelligence as a tool to fight terrorism.


7. Human trafficking is not a one-off offense

Notable recent AML enforcement actions against global corporations that involve human trafficking allegations potentially signal a shift in law enforcement practices and incentivize companies and financial institutions to tackle AML and HT in a multi faceted manner, said Archana Kotecha, Asia Region Director and Head of Legal, Liberty Shared, Hong Kong. Human trafficking is a “basket” of crimes that involves the sale and purchase of human beings, abduction, illegal confinement, criminal intimidation, battery, sexual assault, servitude, etc. and must not be considered as a single offence. It is important that the financial sector’s understanding of modern slavery and human trafficking risks in different places, sectors and populations is strengthened in order to combat these crimes.

Archana Kotecha, Asia Region Director and Head of Legal, Liberty Shared, Hong Kong speaking on the importance of AML to human trafficking

8. Regtech adoption trends

Guy Sheppard, Head of Asia-Pacific Financial Crime, Intelligence and Cyber, SWIFT made a comprehensive presentation on the evolving regulatory technology (regtech) landscape. According to him, the impact of Covid-19 has accelerated innovation and has brought a paradigm shift in social interaction and customer touch-points, including an acceptance of digital on-boarding. However, challenges such as changing criminal typologies, data privacy restrictions, global recession and a failure rate in fintech/regtech may likely lead to a setback in the process of regtech adoption.

Guy Sheppard, Head of Asia-Pacific Financial Crime, Intelligence and Cyber, SWIFT speaking on the barriers and drivers in regtech adoption

Robin Lee, Vice President – APAC, Napier Technologies explains that some of the emerging technologies such as cloud, APIs, big data analytics, artificial intelligence and UI/UX focus and tools provide significant advantages for banks and financial institutions and will help them to effectively apply a risk-based approach going forward.


9. Dealing with cryptoassets

According to Liat Shetret, Senior Advisor, Crypto Policy and Regulation, Elliptic, the points of exposure that banks have to cryptoassets, include wire transfers, credit or debit card usage, merchant account transactions, depositing cash from Bitcoin ATMs, gift cards, etc. She recommends a risk-based approach that assesses the exposure to these touch points, evaluates the financial crime and ML/TF/ sanctions threats and uses appropriate responses such as updating policies and procedures, monitoring solutions and data analytics.

Liat Shetret, Senior Advisor, Crypto Policy and Regulation, Elliptic speaking about the risks from cryptoassets

10. Sanctions Compliance

Jonathan Rogerson, Director – APAC South, Accuity provided an overview of trends and complexities involved in the sanctions environment, especially trade sanctions. Data by Accuity show that sanctions targets have increased 40 per cent since 2014. The Covid-19 pandemic has not had a tangible impact on regulatory activity in the area of sanctions. Coping with this constant change requires robust operating processes, up-to-date information and the best enhancements.

Ravi Amin, Subject Matter Expert, Trade Compliance Specialist, IHS Markit suggests complimenting trade screening with checks on shippers, consignees and companies across all trade documents.

Nicholas Turner, Of Counsel, Steptoe & Johnson covered recent developments around economic sanctions in Iran, Venezuela, North Korea and China/ Hong Kong including additions to the Specially Designated Nationals (SDNs) list. He discussed the increasing use of secondary sanctions by the U.S. that apply to specific activities and significant transactions and do not require the involvement of a U.S. element, unlike primary sanctions.

Nicholas Turner, Of Counsel, Steptoe & Johnson speaking on the issue of secondary sanctions

11. Ultimate Beneficial Ownership identification

Measures to prevent misuse of legal persons for ML/TF include understanding the risks and putting in place robust measures to ensure accuracy, adequacy and timeliness of beneficial ownership information.

Theresa Karunakaran, Director Compliance – Regulatory Affairs, Deutsche Bank proposed that to build a strong and effective framework for UBO idenfication, there is a need for concerted action by Banks, FIs, Regulators and Governments. risk assessment, robust regulatory and legal framework, clearly defined disclosure rules & regulations, reliable and authenticated data, use of technology and enforcement action where needed will be the basic requirements.

Theresa Karunakaran, Director Compliance – Regulatory Affairs, Deutsche Bank

Moran Harari, Senior Researcher at the Tax Justice Network made a presentation on a very relevant and useful tool – the Financial Secrecy Index by the Tax Justice Network – for assessing beneficial ownership registration. The tool can be used by the private sector for customer due diligence risk assessment, internal data risk systems and geographical risk analysis and to prioritise the assessment of suspicious transactions.

It is essential to have public registries for beneficial owners in order to enhance the credibility of ownership data, protect fair market competition and enable fast responses by law enforcement agencies.

– Moran Harari, Senior Researcher at the Tax Justice Network


12. Importance of a sound business compliance culture

Manish Bhandari, Principal Officer AML/CFT/Sanctions Compliance, ICICI Bank explained the importance of a sound compliance culture and its contribution in making the organization strong, resilient and disciplined to enjoy the benefits of sustained growth and customer confidence.

Compliance needs to be a part of the DNA of the organisation, with adherence starting from the top and percolating to the lowest level with each department having its own gatekeeper.

– Manish Bhandari, Principal Officer AML/CFT/Sanctions Compliance, ICICI Bank

Manish Bhandari, Principal Officer AML/CFT/Sanctions Compliance, ICICI Bank speaking on regulatory expectations about compliance culture

13. AML risks from Correspondent Banking

Mohammad Habibur Rahman, Vice President and Head of Financial Institutions (FI), Islami Bank Bangladesh made a presentation on correspondent banking. Though correspondent banking is considered as a high risk business, FATF suggests that correspondent banks apply a risk-based approach to categorise the risks of respondent banks.

Mohammad Habibur Rahman, Vice President and Head of Financial Institutions (FI), Islami Bank Bangladesh

14. Importance of Periodical KYC Reviews

Digitalisation is leading to a lower number of touch points with the customer. Sagar Tanna, Co-Founder, TSS Consultancy stressed that not only are periodic KYC reviews important, but also that they can be done in a way that does not compromise on customer satisfaction.

Sagar Tanna, Co-Founder, TSS Consultancy

For more video excerpts from Fintelekt’s Asia AML/CFT 2nd Annual Summit 2020, visit our Youtube channel: https://www.youtube.com/channel/UCb0x0ex4RZXLkNtdo1dPfSA/playlists