The effectiveness of anti-money laundering (AML) and combatting the financing of terrorism (CFT), is not solely reliant on the initial design, but also comes from the adaptability and responsiveness to evolving risks.
This is according to Arctic Intelligence, a RegTech company helping firms improve their risk assessments. The company recently delved into the importance of feedback loops in enhancing AML/CFT and sanctions compliance programs.
It stated that having effective feedback loops within the compliance framework, coupled with strong governance structures and active listening skills, can build a capable compliance program that can protect against money laundering and terrorist financing.
An AML/CFT feedback loop is a systematic process for collecting, analysing and using information about the performance and outcomes of the compliance program to identify areas for improvement. Continuous monitoring and effectiveness are a core part of the process.
An effective governance structure provides necessary oversight and accountability mechanisms to ensure that feedback loops are not only implemented but are also operational and impactful. Compliance committees or boards play a vital role in setting the strategic direction of the compliance program, making informed decisions based on feedback and allocating resources to address identified gaps or areas for improvement, it said.
Similarly, active listening within the organisation and in relation to regulatory bodies and external stakeholders, ensures the success of feedback loops. By creating a culture of open communication and feedback, companies can ensure employee at all levels will be monitoring for compliance issues or potential improvements.
An effective feedback loop should establish clear mechanisms for feedback collection, analyse feedback for actionable insights, integrate feedback into the compliance program, communicate changes and rationale, and monitor the impact of implemented changes.
Arctic Intelligence empowers financial institutions to complete effective and efficient risk assessments. Its technology streamlines processes, supports compliance with regulatory requirements and enables ongoing risk management.
For more advice on feedback loops, read the full story here.
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