With less than three months until the money laundering regulations and guidance are expected to come into force, staff of banks lack the sufficient training to carry out customer risk assessments, says Bovill.
Seventy four per cent of the firms surveyed said that front line staff, such as business operations or front office staff, are responsible for assigning the overall risk rating to a customer relationship. However, only 52 per cent of firms have front line staff who have received specific training on their bank’s CRA model, suggesting a significant skills gap.
The new regulations involve a greater focus on risk-based staff training requirements, suggesting that firms can expect to face more scrutiny on the training of front office staff who deal with customers. In particular, staff will be required to demonstrate a better understanding of a country’s local political environment and laws.
Some 87 per cent of the banks surveyed also said that they would like more automation and improved connectivity with other financial crimes processes. This shows a real appetite among banks to improve the accuracy and efficiency of their processes.
Jemma Urquhart, managing consultant at Bovill, says: “The new regulations, which come in to force on 26 June 2017, demonstrate a commitment to reducing financial crime. However, it’s worrying that some of the staff in banks making important decisions about how risky a customer is have not received the proper training. If they are the people who have the authority to make the decision, they are ultimately the ones who will be responsible, should anything go wrong. Frontline staff need to be provided with proper training on the customer risk assessment methodology in order to ensure compliance and consistent practice.”
The new regulations emphasise the importance of applying a risk-based approach across a range of requirements and could thus also have implications for the methodology used by firms to carry out the CRAs. Of the 23 banks surveyed, more than half (12) said that they would use a mixture of decision making methods to assess an individual customer’s risk. Of the risk factors which form part of the assessments, all banks surveyed said they assessed country risk. Reassuringly, 92 per cent of the firms interviewed said they used three or more sources to identify a country’s risk level. This shows an awareness of the need to tailor the assessments to provide a more accurate report.
Urquhart adds: “It’s reassuring that banks are currently tailoring their approaches to customer risk assessments so that they can assess on a case by case basis. Firms must continue to invest time and resource to uphold regulatory standards. It is crucial for banks to stay abreast of new legislation and update their CRA methodology to reflect the changes, particularly to Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD) – key elements of the current Directive.”
