Thought Leadership

KYC and DD - How to prevent massive fines, prosecution and Jail Part 4

Previously, I explained how going back to basics and preparing for the spot inspection was the best way to make sure your firm would not add to the $50bn of fines given out to companies over the years for failures in AML and TF procedures.


ou would have all seen the increased diligence of regulators who are almost competing in handing out fines. AML and TF laws turn the concept of innocence on its head. You personally start as guilty and must prove that you did everything in your power to prevent the law being broken. This does not just sit with compliance professionals but goes from the board down to the front-end salesperson. No-one can now hide behind the veil of incorporation.

Under 6AMLD, a minimum Jail term is in force of 4 years for failings in money laundering prevention and terrorist financing (TF).

I have been in the regulated industry for many years and have in my group, a compliance assistance business and 3 regulated businesses including a UK law firm. I have personally also been through inspections (successfully!) myself, worked with regulators and advised individuals and businesses. I understand your pain and your fears.

My company Armadillo is a global RegTech firm based in the UK and specialises in KYC & DD for on-boarding and is on the prestigious RegTech100. 100 of the most innovative RegTech firms in the global compliance market. Our universe of RegTech data and verification solutions consist of 1 billion businesses and 5 billion individuals.

Manny Cohen is Founder & CEO of Armadillo

The prime requirement

In this highly regulated world we live in, how do you not get prosecuted? How does your company not get those massive fines? How do you pass inspections?

Crime prevention has moved from the authorities to the growing regulated industry. It is far easier to police you than the criminals.

Last time we discussed being prepared for ‘no-warning’ inspections as inspectors can go back seven years. Knowing your risks and checking your products, clients and countries and building a risk matrix. Getting your Boss on board, being prepared to say ‘No’ and getting the business to spend money to protect them and yourselves.

The future of aviation is strictly tied to several factors

Always report suspicion

Suspicious Activity Reports (SARs). In every country, systems are always clunky or manual, Yet, you should complete them. It does not hurt you. No one knows what you are doing as telling the client is ‘tipping off’, which you must not do. Many compliance professionals will wait until they are told they can carry on. Real criminals know when you go quiet, what you are doing. In most countries you should just carry on with the work; as long as it is legal.

Remember, if something goes wrong, and you have not filed a report, then that is an excuse for your prosecution. Filing the report adds to your protection.


Everything comes down to culture. The prevention of money laundering and terrorist financing is all about culture. It's got to be a complete top to bottom culture running the process within your organisation.

Build a culture to look for the unusual, to be aware of the loudmouth shouting down the phone; the person overly pushing to make sure a deal goes through; the large funds coming in, sitting in, or going out through accounts; Lawyers receiving money into client accounts and then sending them back as ‘deals’ fall through etc. It’s about creating the culture of ‘the sixth-sense’ within your business.

Making sure your staff throughout the organisation know of all the different scenarios that create the risks works to build the culture. Get people around the table, have a brainstorming session of all the potential cases and investigate them. Make sure that training creates the prevention culture. A questioning culture. Be careful of beneficial owners or entrepreneurs or large organisations that try to restrict information. The ones that don't give you permissions, etc, that are a bit awkward.

It’s not just about relying on systems; you must also rely on your people. The systems are there to help you make decisions.

Using Technology

Now, of course, due to regulation, there's been a massive jump in the number of regulated businesses within the compliance space. New industries have been added and early in 2020 we had the fifth directive adding the oil and gas industry, property rental and exchanges (not just crypto etc. it could also be a Stamp exchange). We have this massive explosion of industries now bought in under the regulations. There are just not enough people of calibre, let alone trained people to deal with the on-boarding and on-going monitoring or to come and help you with your compliance within organisations. The solution: Automate as much as possible. You’d be surprised how many organisations are still using manual systems with very little automation or the automation they have, is old and legacy; as they are not spending money.

The main thing for you to remember is to cover all your bases, do as much as you can, expecting it all to go well is not really an option; you need to constantly check that the processes you put in place are working. If you were the MLRO in a company 5 years ago and it turns out your actions helped terrorists or arms smugglers on the other side of the world, expect your former employer to drag you into it. You therefore must do everything to protect yourself and your business.

Good luck and Stay Safe!!

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