In this interview, Maja Andreevska-Blazhevska, our Head of Financial Crime Compliance & Money Laundering Reporting Officer (MLRO) shares insights on the evolving landscape of anti-money laundering (AML) compliance and how Electronic Money Institutions (EMIs) can strategically navigate these challenges.

Interviewer: In your view, how can Electronic Money Institutions (EMIs) strategically leverage anti money-laundering (AML) compliance to gain a competitive edge in the current regulatory environment, particularly in Europe where regulations are constantly tightening?

Maja: Money laundering and terrorist financing (ML/TF) pose a serious threat to the integrity of not only the EU economy but also the global financial system. Subject persons within the financial system, including EMIs, are constantly exposed to these risks and act as the main gatekeepers. These gatekeepers, including EMIs, are engaged in a constant “battle” on two fronts: firstly, to continually understand, adapt to, and implement regulatory amendments; and secondly, to implement, update, and follow up on mitigating measures and actions to prevent their companies from being used for money laundering and terrorist financing activities.

In such an environment, both financial institutions and regulators play a crucial role. However, conflicting approaches often hamper effective global collaboration, leading to a situation where resources are not used to their best advantage. EMIs primarily operate with international and cross-border transactions. Cross-border financial crime is here to stay. Criminals exploit this intricate network to move illicit funds across borders and evade capture, while people everywhere enjoy the convenience of a globally connected financial system. No financial institution or country is entirely protected or immune.

Technological solutions and tools are valuable additions to these efforts, assisting in detecting unusual or suspicious transactions, particularly in preventing and detecting cross-border transfers of illicit funds. However, a more holistic approach is necessary. On a macro level, as the saying goes, “a single swallow does not signify spring,” this demonstrates the importance of creating strategic ground, using appropriate tools, and building trust and cooperation not just amongst employees `within one institution, but also amongst the main actors (regulators, subject persons, MLROs etc.) involved in preventing ML/TF within a sector, country, or even across the entire EU.

This is a team effort. Gathering and analysing information and feedback to create a regional picture for targeted supervisory efforts, including multi-country initiatives, is essential within the EU. Moving forward, while good practices are emerging in cross-border transaction data collection and analysis, it is crucial to not only increase regulatory requirements and controls but also integrate cross-border communication and gather and share data collection to better understand and mitigate these risks.

On a micro level (within a single institution, or in this case, an EMI), the following factors are important:

  • A well-established and robust function with knowledgeable employees on the subject matter.
  • Continuous investment in appropriate systems and software, which are essential pillars of AML/CFT compliance tools in day-to-day operations.
  • Regular training in relation to the latest developments on the subject matter.
  • Continuous support from the business and top management, including but not limited to the Board of Directors.

These factors all contribute to creating a unique and competitive advantage.

Interviewer: FIL is known for fostering a strong culture of compliance and ethical conduct. How does your role as MLRO help to shape and influence this culture?

Maja: A comprehensive and strong compliance culture is an environment where both employees and top management understand the importance of adhering to laws, regulations, and internal policies and procedures. In such an environment, one can be confident that a company or group of companies are building and maintaining strong ethical conduct. To achieve this best-in-class standard of building a strong compliance and ethical culture, the company needs strong leadership and a knowledgeable MLRO who can lead by example. Unfortunately, in today’s dynamic environment, this is not always an easy task; however, it should become an integral part of every segment of the company’s operations.

Continuous training emphasising good and ethical behaviour, day-to-day communication with employees, and guidance in relation to the set of rules and acceptable behaviour are essential in continually building and maintaining a good, ethical compliance culture – a culture that is embedded within the company’s DNA.

Building a compliance culture within an organisation lays the foundation for ethical practices and responsible behaviour. It’s not just about ticking boxes and meeting legal requirements; it’s about fostering a shared mindset that values integrity, transparency, and accountability.

When it comes to the role of the MLRO shaping and cultivating this behaviour, one has to consider the following aspects and skills:

  • Adequate knowledge on the subject matter, including but not limited to education and comprehensive training.
  • Familiarity with the company’s operations, processes, and employees.
  • Strong leadership communication skills, with the ability to encourage open dialogue with all relevant stakeholders within the company.
  • The ability to lead by example.
  • Support from the Board of Directors.

By fostering an environment where compliance is embraced, companies can safeguard their reputation, mitigate risks, and promote trust among stakeholders. In addition, and in line with the European Banking Authority guidelines, FIL has appointed a board member responsible for AML/CFT issues.

Interviewer: EMIs are known for innovation in financial services. How do you see KYC/AML practices evolving alongside technological advancements in the financial sector to ensure a balance between security and providing a seamless, user-friendly experience for legitimate customers?

Maja: Technology has become an integral part of our daily existence. Financial institutions are keeping pace with, if not leading, the latest technological developments to satisfy customer expectations while also aligning with the latest regulatory requirements.  The COVID-19 pandemic accelerated this process, as companies significantly increased their investment in new technologies for client onboarding and for improving their internal AML/CFT systems and software.

Financial institutions recognize that, by implementing new technologies, they can speed up processes, increase efficiency, and simplify customer onboarding for a smoother overall experience.  However, companies must not forget their obligations and commitments according to regulatory requirements and standards. They should simultaneously align these evolving technologies with both customer needs and AML/CFT measures. As illicit financial activities become increasingly sophisticated, the need for robust and adaptive AML/CFT safeguards is more critical than ever.

One must consider that for a company with more than 10,000 clients, performing sanctions checks, adverse media screening, PEP screening, transaction scrutinisation, and monitoring without having proper technological tools in place is unimaginable.

While not on topic, tech is also a large part of cybersecurity, and financial institutions invest substantial resources to protect themselves against cyberattacks. Ultimately, technology is a powerful ally when used with appropriate consideration of all these aspects.

Interviewer: Effective AML efforts often rely on information sharing between institutions and authorities. How can EMIs better collaborate with traditional/legacy financial institutions and regulatory bodies to strengthen the AML ecosystem? 

Maja: Cooperation and continuous open dialogue with regulatory authorities are vital for building a sound and successful environment where relevant stakeholders share a common goal: preventing and detecting money laundering and terrorist financing. A strong and robust AML/CFT ecosystem is unimaginable without open cooperation, information sharing, and continuous trust-building among all members of the chain.

To achieve this, a coordinated approach to supervision and regulation is necessary. This reduces regulatory burdens and enhances efficiency. Regulators should also promote information sharing, which greatly increases the effectiveness of supervision and regulation. With these principles in mind, I believe the new Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) supervisory authority will play a significant part in streamlining regulation.

On a local level, I would like to commend the Malta Financial Intelligence Analysis Unit (FIAU) for their initiative in organising respective AML clinics and workshops. These events increase cooperation and information sharing among subject persons, and I hope similar events will be organised regularly going forward, extending beyond the financial services industry.

Interviewer: Money laundering typologies are constantly adapting. How do you keep informed about the latest trends and ensure your AML framework is adaptable to these evolving threats? Do you carry out training and awareness in strengthening the AML culture within FIL, and how do you ensure it is embedded across all levels?

Maja: As technology advances and regulatory requirements on the subject matter increase, criminals find increasingly inventive ways to conceal their illicit funds. Payment transfers evolve alongside technological developments; client onboarding methods change, and with these shifts, the techniques and patterns of money launderers are changing and evolving.

Change is so rapid that some of the AML/CFT typology documents and guidelines written in 2020 might now seem obsolete. For example, the perception that clients using online banking are inherently riskier would now be seen as outdated. On the other hand, the three main stages of money laundering (placement, layering, and integration) still apply, even if the specific methods within those stages have become more sophisticated. New techniques for ML/TF often exploit new technologies and are closely monitored by subject persons and regulatory authorities.

For an MLRO to stay current on the latest trends and developments, they need continuous access to relevant training and seminars, to follow the latest publications of local regulators (such as the FIAU guidelines and reports) and international sources (FATF, Wolfsberg, Moneyval, etc.), and to constantly monitor their company’s internal activities and reporting. These insights should inform regular internal training for all relevant employees.

MLROs, with the assistance of technology and front-line staff, also have a duty to identify new typologies of money laundering and terrorist financing that might arise within their company. This information is essential for reporting to regulatory authorities, who should further scrutinise and consolidate emerging patterns into updated publications available to subject persons. This is something the FIAU does regularly, showing that open cooperation between subject persons and authorities is essential.

Interviewer: Technological advancements like AI and big data are being explored for AML compliance. What is your vision for the future of AML compliance, particularly for EMIs, and how can EMIs stay ahead of the curve in this rapidly evolving landscape?

Maja: In an era where technology is deeply ingrained into our daily lives, imagining life without a mobile phone, online payments, digital onboarding, etc., is practically impossible. The digital transformation of the financial services sector has progressed at an unprecedented pace, and we cannot envision our lives without technology or AI. Again, could a team of 10 AML specialists manually perform sanctions and PEP screening for 10,000 entities daily?

Employing generative Artificial Intelligence (AI) for AML/CFT activities has proven itself. It decreases cost and time, increases efficiency, and automates processes. AI uses advanced algorithms that can swiftly analyse vast amounts of data from diverse sources, identifying potential red flags and suspicious activities. Automation streamlines onboarding, customer due diligence, and transaction monitoring. This all contributes to reducing transcription or manual errors and ensuring efficiency in compliance procedures. Financial institutions can focus more on investigating genuine risks and staying ahead of money launderers and terrorists.

Financial crime and AML specialists, alongside those on the front lines, benefit from AI. Know Your Customer (KYC) and identity verification through AI is revolutionary when compared to the traditional face-to-face methods of 20 years ago.

Biometric authentication, facial recognition, and digital document verification have significantly improved the accuracy and efficiency of customer onboarding, while making it more challenging for criminals to use falsified identities for illicit transactions.

And this is just the beginning. AI applications in operations will expand even further. However, I believe urgent regulation and control of AI are very much needed. While we acknowledge the significant benefits, we should be cautious about the potential consequences and challenges to come. My concern is that further development of AI and technological advancements might outpace regulatory frameworks. We need adequate control and the “human touch” to avoid a scenario where changes to the landscape happen unexpectedly and without proper safeguards in place for end-users.

To conclude, technology brings efficiency, accuracy, and the ability to perform live transaction monitoring. Early risk identification and mitigation are crucial. As technology evolves, ongoing collaboration between the private sector, regulators, and technology innovators is imperative for creating a resilient and adaptive AML/CFT ecosystem that upholds the integrity of the global financial system.