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The importance of firms embracing Open Banking

Open Banking is now available through most major UK banks, but what exactly is it, how does it work, and what role can it play within compliance and anti-money laundering?

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What is Open Banking?

You don’t have to look far to see how companies have financially suffered as a result of failing to sufficiently guard against the risk of money laundering. However, SoF checking can be a powerful weapon against this threat — and is quicker and easier to utilise than you might have thought.

What is Open Banking?

You don’t have to look far to see how companies have financially suffered as a result of failing to sufficiently guard against the risk of ...

Source of funds checks

With Open Banking, you can run an SoF check on an individual’s or company’s bank account while requiring minimal input from the client. Using SmartSearch’s digital compliance software, you can run the SoF check alongside other AML checks on the same client or just as a standalone check.

Source of funds checks

With Open Banking, you can run an SoF check on an individual’s or company’s bank account while requiring minimal input from the client. ...

Your legal responsibilities

When performing Enhanced Due Diligence (EDD), conduct a Source of Wealth check using evidence from the client or reliable external sources. The Proceeds of Crime Act 2002 (POCA) mandates submitting a Suspicious Activity Report (SAR) to the National Crime Agency (NCA) if criminal property is suspected in money laundering.

Your legal responsibilities

When performing Enhanced Due Diligence (EDD), conduct a Source of Wealth check using evidence from the client or reliable external sources. ...

How can Opening Banking be used within compliance?

Regulated firms must prove their client's money is from a legitimate source. Open Banking tech allows secure, quick sharing of financial data, letting firms access digital bank statements to verify clients' Source of Funds.

How can Opening Banking be used within compliance?

Regulated firms must prove their client's money is from a legitimate source. Open Banking tech allows secure, quick sharing of financial ...

Source of Funds

What is a Source of Funds check?

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High-Risk Countries and Source of Wealth checks

The global nature of money laundering and terrorist financing has compelled governments around the world to introduce legislation and legal and regulatory processes aimed at preventing these criminal activities from undermining the international financial system. 

What are classed as AML/CFT high-risk countries?

Generally, these are deemed countries that are significantly deficient in their AML/CFT measures and/or high in corruption. Various countries and international bodies hold their own lists of high-risk AML/CFT countries — with the FATF alone compiling several of these lists.

UK regulations on AML/CFT high-risk third countries

Though the UK, US, and European Union have their own lists of AML/CFT high-risk countries, these lists are almost identical to those of the FATF, as they use the same methodology for assessing how individual countries differ in their risk profile.

The importance of Source of Wealth analysis

By investigating a client’s source of wealth, you can potentially help to uncover dubious financial activities that could be concealing criminal activities.

The importance of Enhanced Due Diligence

Enhanced Due Diligence (EDD) requires checks in addition to those undertaken as part of the basic Customer Due Diligence (CDD) process. EDD checks include verifying the source of wealth.

How does Open Banking work?

Open Banking works by securely sharing information via application programming interfaces (APIs). APIs allow information to be exchanged between two providers and have been in widespread use for many years.
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Frequently Asked Questions

What are red flags in AML?

According to the Financial Action Task Force (FATF) - the independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing – Red Flags can be divided into four categories: client, source of funds, professional advice and the nature of the transaction.

What is a risk based approach to money laundering?

Encouraged by both the FATF and the FCA, a risk-based approach requires that firms thoroughly assess the money laundering threat posed to their business, and deploy an appropriate amount of resources to counter it. This is a proactive approach which should enable companies to detect and diffuse any risk of money laundering before it can take place, whilst using resources efficiently.

What AML checks are required?

AML checks, or Anti-Money Laundering checks, are a crucial part of the financial system and are required by various regulatory bodies around the world. These checks are designed to prevent money laundering, terrorist financing, and other illegal activities. The specific AML checks required may vary depending on the jurisdiction and the nature of the business.

What are AML controls?

AML controls, also known as anti-money laundering controls, are measures put in place by financial institutions to detect and prevent money laundering activities. These controls aim to ensure that the institution is not unknowingly facilitating or participating in illegal financial transactions. AML controls typically involve the implementation of strict customer identification and verification procedures, monitoring of customer transactions for suspicious activities, and reporting of any suspicious transactions to the relevant authorities.