Best practices when seeking third-party assistance in AML Compliance
Best practices when seeking third-party assistance in AML Compliance
The Financial Institutions, Designated Non-Financial Businesses and Professions (DNFBPs) and Virtual Asset Service Providers (VASPs) have been identified as regulated entities under the anti-money laundering (AML) regulations of the UAE. While designing and implementing the measures for combating money laundering and managing the regulatory compliance obligations under AML laws, these regulated entities may face challenges and seek professional assistance from third-party AML experts.
With effective compliance and quality risk mitigation measures, the regulated entities can safeguard the business from financial crime vulnerabilities, non-compliance penalties and reputational damages.
Given the significance of AML compliance by the regulated entities in the UAE, regulated entities recognize its necessity. However, managing all compliance activities with the business operations may not be easy. It requires commitment towards AML compliance with an adequate investment of financial resources, time, and exceptional AML proficiency.
Thus, when struggling to manage compliance, the recommended solution is to seek professional assistance from third-party consultants specialized in the AML domain.
When relying on third parties to support the AML journey, the regulated entities must identify the appropriate service providers and assess their capabilities.
This blog discusses the best practices for choosing the right third-party professionals to complement the AML compliance function. Before that, let’s understand the merits of seeking third-party AML expertise for the compliance function.
Importance of seeking third-party professional help for managing AML compliance function
AML compliance is a complex, challenging, and time-consuming exercise. It requires the regulated entities to manage many tasks, documentation and reporting. Amid these complexities and routine business workload, the possibility of goofing up the accuracy and timeliness of AML compliance cannot be overruled. To avoid these errors, incompleteness, and delays, the regulated entities can seek assistance from AML consultants as advisory support or outsource some of the AML compliance exercises.
Relying on or seeking support from third-party professionals ensures that an expert AML compliance services provider works on the regulated entities’ AML obligations. This means fewer chances of errors, on-time submissions, and completeness. Thus, this can guarantee quality work, employing the proper AML measures to detect and prevent risks and successfully complying with AML regulations.
Another benefit of outsourcing AML compliance is a complete focus on strategic initiatives. Since the experts handle the AML compliance function, the regulated entities needn’t worry about it and can put all the energy, time, and effort into operational excellence. This empowers the entity’s focus on critical goals and core business operations.
Working with expert AML compliance consultants gives access to their skills and knowledge. Also, they use the latest technology solutions for managing the AML processes and procedures. They are aware of the ins and outs of the entire AML framework. Thus, third-party professionals can bring better results, more insights, and a complete AML compliance trail for the regulated entities to the table.
AML compliance services providers stay up-to-date on the latest regulations and guidelines. When trying to manage compliance on its own, there are possibilities that the regulated entities rely on out-of-date and non-trendy AML practices. Outsourcing or seeking professional assistance with the latest updates, advanced tools, and human expertise is always recommended.
By outsourcing some of the core AML compliance tasks, the regulated entities save hiring and recruiting money. If the entities do it internally, they will need to build a compliance team and hire specialists, which requires spending a lot of time and money on hiring, onboarding, and aml training. However, third-party consultants help the entities do away with this burden and costs while leveraging the benefit of experienced and trained professionals.
Another benefit of outsourcing or using AML professional’s support is an unbiased and fair view of compliance. They are experts and have been working on the AML landscape for years. So, their views are objective and independent of the entity’s business or customer relationships. Such transparent and independent views prevent money laundering threats to the business and ensure adequate compliance in the routine course of business.
So, consider using third-party expertise and outsourcing the AML compliance function for cost-effective services and AML-compliant business. Incorporate the best practices mentioned in the section below while identifying the right AML consultant for the business.
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Best practices while appointing a third-party AML consultant for AML compliance
While outsourcing the AML compliance function, keep in mind the following best practices:
Understand the objectives behind appointing consultants and the extent of AML function outsourcing
If the regulated entities want outsourcing to add value to the business, understand the reasons for doing it. If the entities do not have well-defined objectives but are outsourcing or appointing a consultant only since their counterparts are doing it, they are in for doom. Engage in a prudent assessment of the AML and overall business objectives before outsourcing the compliance function.
List the activities under AML compliance requirements. Compare the pros and cons of outsourcing vs in-house for each. Consider the factors of skills, costs, time, and impact on operations for comparison. At the end of this analysis, the entities will understand what they want to outsource and what is to be managed in-house.
Such an assessment will give the entities a complete view of what tasks are to be outsourced to the consultants or the extent of reliance to be placed on managing AML functions. This may include:
- Managed Know Your Customer (KYC) and Customer Due Diligence (CDD) function
- Conducting Enterprise-Wide Risk Assessments
- Developing and maintaining the AML/CFT policies, procedures and controls
- Assistance in the preparation and filing of regulatory reports and AML surveys
Check if the outsourcing partner has relevant resources and capabilities for AML
The regulated entities must check the outsourcing partner’s capabilities in AML compliance. They must have relevant skills and competencies to help the business with all AML activities.
Their consultants and professionals must have AML knowledge and awareness of laws. They must have adequate experience performing such AML activities.
Besides human expertise, they must have the tools and technologies to bring efficiency and accuracy in compliance. Technological solutions can make risk assessments, CDD, and data management faster and easier.
Thus, check these attributes while outsourcing the compliance function to an expert AML service provider. Ensure the service provider has all these skills and case studies of successful AML compliance. Only once the entities get that trust in them can they have a successful outsourcing relationship, adding value to the AML compliance function.
Ensure they follow a customized approach for AML compliance
The outsourcing AML partner must understand the regulated entity’s business. They cannot come on board and start the AML activities unless they learn the entity’s business profile and existing compliance obligations. It needs a careful assessment followed by a customized approach.
The third-party consultants must study the business’s AML requirements. They must understand the industry-specific AML expectations in the UAE. It requires an assessment of the business’s exposure to financial crime. They must conduct a gap analysis to understand where the entity lacks AML compliance. These specifications of AML and deliverables give the service provider an idea of the compliance journey.
Based on these assessments, the consultant must prepare a customized plan detailing how to go about with AML compliance of the regulated entity. The customization is specific to the AML requirements, business model, and industry sector. A generalized AML compliance framework can increase the chances of incompleteness or inaccuracies in compliance.
Put in place an agreement for the discussed terms and conditions and scope of work
The dynamics of the outsourcing or AML consultancy relationship depend on how clear the contract is. The regulated must sign an agreement with the outsourcing services provider. The contract must mention the scope, inclusions, exclusions, cost, schedule, and terms and conditions. All these elements are essential for clarity purposes, including reference to the following critical aspects:
- The communication flow between the regulated entity’s team and the consultant’s team,
- List the areas where both teams will collaborate,
- Explain the process flow for approvals and permissions (for AML-specific controls, etc.).
Talk about data security and confidentiality
How can the regulated entities ensure the safety and security of business-sensitive data?
The entities will share the customers’ personal data and company information with the AML consultant. If there are leakages of any of this data, it can harm the business’s reputation and customer trust.
The entities must talk about it with the outsourcer before signing the agreement. Discuss what the business expects from them and what security measures they have taken. The regulated entity must check its data security and business continuity strategies. Track the tools and techniques they are using to protect information.
Establish clear lines of communication
If the regulated entities do not have regular communication with the AML outsourcing service providers, it can affect the quality of the AML compliance efforts.
The regulated entity must identify and allocate a dedicated contact person to keep the communication channel open and live with the AML service provider. The person must communicate the entity’s expectations and changes with the service provider and be ready to help them with data based on their requests and requirements. Thus, establish transparent communication practices to foster collaborative work for AML compliance.
Clear communication facilitates planning during uncertain situations. Ensure to have effective communication, even with different time zones and languages.
Be involved in the AML compliance function as a controlling factor
After outsourcing the AML compliance function, what do the regulated entities do?
Do entities intervene? If yes, on a daily or weekly basis? If not, how to track work performance?
All these are crucial aspects the regulated entities must decide on with the third-party AML solution provider. At least the entity must stay involved as a controlling factor in each AML activity, as the ultimate compliance responsibility lies with the regulated entity itself. The regulated entity’s Compliance Officer must monitor the execution of each task and the outcome.
The entity must conduct regular meetings to see the work status and results.
The entity’s money is being spent on the outsourced AML functions, and reputation and regulatory compliance are at stake. The regulated entities must oversee how judicious the spending is. With such surface-level engagement, the entities know whether they can achieve AML goals.
The regulated entities must incorporate these best practices while outsourcing the AML compliance function or seeking professional assistance for managing the business risk. It will lead to more chances of success in the AML efforts, preventing the threats of money laundering and terrorism financing.
Many businesses fear outsourcing their AML compliance function. They dread loss of data confidentiality, control of processes, and accountability. But if due consideration is given to the essential elements, outsourcing and reliance on third parties is safe and offers value-addition.
If you are looking for a proficient and professional AML compliance services provider, we are here for you.
AML UAE’s expertise as an AML Consultancy Service Provider
AML UAE is a leading provider of AML compliance services for regulated entities in the UAE. Our spectrum of services helps you adhere to all the provisions of AML regulations. We help you build confidence in your AML policies, procedures, and controls for effective results.
You can partner with us for one-off service or regular support to the AML compliance function. Whatever way we engage with you, your business complies with regulatory obligations. You get recommendations for remediation actions based on your business’s AML requirements and the quality and efficacy of existing measures.
So, if you are searching for end-to-end AML support for managing your AML compliance functions, you are at the right destination.
Interested in learning about how AML UAE can help you with AML compliance?
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About the Author
Jyoti Maheshwari
CAMS, ACA
Jyoti has over 7 years of hands-on experience in regulatory compliance, policymaking, risk management, technology consultancy, and implementation. She holds vast experience with Anti-Money Laundering rules and regulations and helps companies deploy adequate mitigation measures and comply with legal requirements. Jyoti has been instrumental in optimizing business processes, documenting business requirements, preparing FRD, BRD, and SRS, and implementing IT solutions.