As financial crime increasingly extends beyond national borders, the need for coordinated and adaptive AML strategies is becoming critical. In their latest commentary, Paweł Karp and Bartosz Segit, AML Practice Leads at Accenture Sp. z o.o., examine the practical and political barriers that must be addressed to build an effective international monitoring framework.
In their publication, the authors emphasize that no single institution or jurisdiction can effectively counter modern financial crime on its own. A meaningful response requires legal, technological, and operational alignment across markets.
They explain:
Considering the global nature of financial crime, what practical and political challenges must be addressed to create a truly comprehensive, cross-border AML monitoring system that provides effective oversight while respecting national sovereignty and data protection laws? Does it involve more cooperation between foreign financial institutions?
Yes, a truly comprehensive system absolutely involves more cooperation between foreign financial institutions. This cooperation can take the form of public-private partnerships, where institutions collaborate with regulators and law enforcement to share information and intelligence on emerging threats. Initiatives like the Financial Action Task Force (FATF) encourage this but operationalizing it effectively requires legal and technical frameworks that permit data sharing while still safeguarding privacy.
Regarding political and practical challenges:
- Practical challenges include the lack of a standardized global regulatory framework, leading to fragmented compliance requirements across jurisdictions. This makes consistent implementation difficult for financial institutions. Technical obstacles also remain – such as the absence of interoperable systems for information sharing and the difficulty of tracking complex, multi-jurisdictional schemes. High volumes of false positives and outdated technology can further strain resources and impede effective investigations.
- Political challenges are often the hardest to overcome. These involve reconciling national sovereignty laws and differing data privacy regulations, such as the EU’s General Data Protection Regulation (GDPR), which may restrict the cross-border sharing of sensitive financial information. Countries also vary in their political will to enforce AML regulations, and lack of trust between jurisdictions can hinder cooperation.
- While some of these challenges are addressed within the EU, the EU remains only an ‘island’ within the global landscape of money laundering.
The experts also highlight how EU reforms can prevent over-regulation while maintaining strong AML standards:
“With EU initiatives imposing stricter compliance obligations, how can regulators strike the right balance between ensuring AML robustness and avoiding regulatory burdens that could stifle legitimate innovation or push activity into unregulated jurisdictions?
To strike the right balance, regulators can adopt a risk-based approach – and they increasingly do. This means focusing resources and stricter regulations on areas and institutions that present the greatest risk of financial crime, rather than applying a one-size-fits-all model. A fintech startup handling low transaction volumes, for example, may require less stringent oversight than a multinational bank engaged in complex, cross-border activity.Regulators can also embrace regulatory technology (RegTech). Encouraging the use of technologies such as AI and automation can help institutions streamline compliance processes, reduce manual work, and lower costs. This enables more effective monitoring while easing administrative burdens. Clear guidance and a ‘safe harbor’ for testing and implementing new compliance tools can further support innovation without the risk of immediate penalties.
Finally, regulators can work to harmonize standards across the EU to reduce fragmentation and complexity for companies operating in multiple member states.”
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