Taking a risk-based approach to client onboarding: Pinsent Masons case study
Taking a risk-based approach to AML compliance with traditional tools and methodologies is slow and arduous, leading to an unbalanced approach to AML risk management. This e-book explores why firms are falling short in adopting a risk-based approach, and how Pinsent Masons are collaborating with Xapien to design, test, and co-develop a fully automated AML due diligence and risk assessment tool. This tool will enable firms like yours to streamline onboarding and create a better-balanced AML compliance system that meets the needs of clients.
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What's inside
The AML challenge impacting bottom-lines
Without a triage system to differentiate clients by risk level, compliance teams can and do misplace focus and spend a disproportionate amount of time and effort on low-risk clients and matters. This lack of differentiation generates more work for in-house compliance teams and client-facing teams. It also impacts client relationships and impacts the firm’s bottom line when billable work is delayed and fee-earning time is being taken up dealing with AML queries that do not reduce the risk posed by the client.
The barriers to an effective risk-based approach
The Financial Action Task Force (FATF) guidance is clear that due diligence should be tailored to a client’s risk profile. However, most compliance teams rely on initial AML screening to construct a client’s risk profile. While screening is an important first step, it provides only a partial view of a client’s risk level (i.e. whether they are sanctioned, a Politically Exposed Person, or on a watchlist). It provides no wider insight about the client other than whether they appear on these constrained datasets.
Implementing an Initial Due Diligence process
Initial Due Diligence begins by screening clients against AML databases to ensure they aren’t politically exposed, sanctioned, or on a watchlist. Compliance teams must interpret that data within a broader context, using information from the entire indexed internet to apply a genuinely risk-based approach. However, there are limitations to this process manually. To establish a sustainable Initial Due Diligence process, compliance teams need a sophisticated technology tool that automates the workflow.