As organisations grapple with evolving legislation and the cost of compliance, the decision to outsource AML processes presents both opportunities and challenges.
Being an AML outsourcing company ourselves, we often get asked about the pros and cons of outsourcing AML tasks. In this article we share some of the discussions we have with compliance managers and business leaders to help you make informed decisions on the benefits and potential drawbacks of outsourcing.
What are the benefits of outsourcing AML?
We’re slightly biased as we work with companies on their AML obligations every day, but there is no doubt there are some key benefits to outsourcing. Here are a few of our customer favourites.
Minimises costs to your business
Going it alone can be tough and can mean you are spending your time on compliance issues rather than dealing with your core business.
While there will be costs partnering with an AML outsourcing company, the expertise you will have access to with the right company will provide you with cost effective solutions, and relieve the burden on your business.
Tip: Ensure you understand what the initial (if any) and ongoing costs are, and what you are getting for your money. There are some outsourcing companies who do not provide support access to their expert team so make sure you check this out as its a real benefit being able to talk to an expert.
Improves your compliance success
Partner with a customer focussed AML company who has the skills to ensure adherence to evolving AML regulations and industry best practices. This will help provide operational efficiencies, avoid the risk of non-compliance and reputational damage to your business.
Tip: You cannot contract out your obligations but to enjoy the benefits of partnership take the time to ensure you are working with a team of experts who know AML and the intricacies of compliance and legislative requirements.
Provides access to expertise
We find there are times when clients want some extra help to get through a busy period or help with complicated cases. Partnering with the right AML outsourcing company can allow you to tap into specialised knowledge when you need it, and gain access to advanced AML technology to streamline your processes.
Tip: Find out how readily expertise is available to you and when and where you can get help when required. Always request information on how you will be supported if you increase your volumes and the responses you will receive. Talking to an existing customer is a great way to cover off concerns
Allows for increased efficiencies
One of the biggest issues our customers face is the time and effort it takes to manage AML requirements. Both large and small businesses talk about the burden of complying with legislation. Partnering with AML experts can help streamline processes and reduce manual efforts as their expertise can provide bespoke solutions, technical advantages, and dedicated AML knowledge.
Tip: Choose a provider who has the right skills to provide you with valuable compliance expertise, and builds solutions alongside your changing needs.
Supports scalability and flexibility
As businesses balance cost versus quality it is good to know your AML provider can easily adjust service levels based on your business needs and makes cost adjustments to reflect this.
Changes in regulatory requirements may also cause a change in the AML demands to your business. Having a partner who can help you adapt to legislation updates, and scale up resources when required can help ensure you continue to meet your compliance obligations. As your business volumes increase ensure your provider can still meet those SLA turnaround times that you have come to expect.
Tip: Look for a partner who can be there for the long-haul, understands the demands of your business, and has a flexible service that suits your changing needs.
What are the risks of outsourcing AML?
There are some common concerns we hear from entities when it comes to outsourcing AML. These valid queries should form part of your discussions with providers if you ever decide outsourcing is right for your business. Work through them and you could pave the way for a more secure and efficient future in navigating the complexities of AML regulations.
Dependence on the provider can feel like there is a loss of control
You will be working closely with your outsourcing partner and relying on their expertise to carry out important AML tasks, however you should always maintain an overview of AML activity. This will help ensure you remain in control while being relieved of the day-to-day administrative burdens.
Agree with your provider on how risk will be assessed on customers and your customer due diligence (CDD) approach, so you can trust you are both working to the same performance levels.
Tip: Ensure you can show actual evidence (i.e. verification information) that CDD is being done according to regulations, and your framework documents. You will need this evidence at audit time. Review CDD outcomes carried out by your outsourcing provider to ensure the results are in line with your understanding of your customer and the level of risk they pose.
There may be communication challenges
Involving a third-party in your AML processes could create an unwelcome opportunity for miscommunication or for tasks to fall through the gaps. However, with the right processes in place and the right partner this shouldn’t happen. Work closely with your AML provider, agree specific performance expectations, and maintain open and regular communication channels.
Tip: Leverage the expertise and technology of AML outsourcing companies but don’t forget to ensure deliverables are clearly outlined, and you have easy access to current cases and historical data.
You may worry about the security and retrieval of your data
When relying on another business for technology, and entrusting customer data with a third-party provider you need to ensure the resources you are using meet your own security and privacy expectations. Ensure partners have robust data security measures that comply with data privacy regulations.
Confirm what is done with your data and establish how you access it. You will want to be able to view and retrieve your data easily to keep track of all compliance activity and access detailed audit trails and reporting.
Tip: Consider providers who use cloud-based AML solutions that offer enhanced security, scalability, and optimum availability. Confirm what is done with your data and ensure it is always available to you even if you move providers.
What legislation says about AML outsourcing
The AML/CFT Act states that:
“a reporting entity may authorise a person to be its agent and rely on that agent to conduct the customer due diligence procedures and obtain any information required for customer due diligence under this Act or regulations.”
This means you can use an AML outsourcing company but as with any third-party you are working with you should ensure everything is being done properly. Stay close to the work being done, and run your own quality assurance checks.
Remember, you are the one who is liable if your AML activity doesn’t pass regulator requirements, not your AML provider.
Making your decision
The decision to seek an AML outsourcing provider presents a number of pros and cons that you should carefully consider before making your choice. On the positive side, outsourcing can lead to significant cost savings, access to expert knowledge, and enhanced efficiency in compliance processes. However, it also poses some challenges if you choose the wrong partner for your business.
Do your due diligence on providers, establish clear service level agreements, ensure they are experts, and understand what happens to your data, the security, and retrieval of it.
Ultimately, the choice should align with your specific needs, be a good fit for your company and be with people you can trust.
To delve deeper into how AML outsourcing can transform compliance for your organisation, contact our team for more information.
Already outsourcing AML activity but thinking of switching providers?
Take a look at what to consider when making that move in our ‘changing AML providers checklist.’
About the author
Jerome Cookson
Jerome is tic company’s Chief of Revenue and Product, where he applies his extensive background in finance and building operational capabilities. Originally from the UK, where he ran the family business, involved in property investment, company and land acquisition for renewable energy sources, he moved to New Zealand in 2011 with his now-wife.
