Unlocking the potential of data and tech in the EU’s new AML/CFT package

The EU’s latest Anti-Money Laundering and Countering the Financing of Terrorism,  (AML/CFT), package introduces significant compliance requirements. With a goal of enhanced transparency, DT4C collaborates with EU regulators to streamline the standards’ implementation, helping financial institutions adapt swiftly to the new AML/CFT package.

Key areas: AML/CFT package

The Data and Technology for Compliance (DT4C) Alliance is a coalition of leading data and technology companies. As trusted partners to financial institutions, members are pivotal in shaping compliance processes to detect and prevent fraud.

As a DT4C member, Encompass brings transformative automation to Know Your Customer (KYC) compliance requirements, easing the transition and ensuring institutions stay competitive. Below, we explore key areas of the AML/CFT package and show how Encompass’s automated solutions and Corporate Digital Identity (CDI) capabilities help overcome these challenges.

Beneficial Ownership (BO) transparency takes center stage

The EU’s increased focus on BO transparency signals a pivotal shift in the regulatory landscape. New requirements mandate businesses to disclose ultimate ownership information to dismantle hidden corporate structures often tied to illicit activities. While the 25% ownership threshold remains the standard, it can be reduced to 15% for high-risk industries, including crypto and cash-intensive sectors.

The role of automation and CDI in beneficial ownership transparency

With the increased focus on transparency, banks face mounting pressure. Particularly to untangle complex corporate structures and verify Ultimate Beneficial Owners (UBOs) accurately and efficiently. Encompass’s automated platform addresses this need by consolidating both public and private data. This can be from multiple KYC providers in real-time, creating a comprehensive CDI profile for each client.

This approach enables a full, accurate view of ownership hierarchies through automated corporate structure mapping and data normalization. By combining data sources, compliance teams are provided with visual UBO hierarchy charts. These map relationships between entities, offering a clear, actionable understanding of ownership structures. This real-time, data-rich CDI profile empowers banks to make faster, more informed decisions while meeting transparency requirements seamlessly.

By leveraging automation and CDI, banks can:

• Quickly source, match, and verify data on corporate entities and individuals.
• Reduce manual intervention in verifying and visualizing BO data, resulting in lower costs and faster compliance cycles.
• Access a standardized, auditable client profile, ensuring regulatory adherence and meeting EU AML standards seamlessly.

Expanded scope for Customer Due Diligence (CDD)

The EU’s AML package expands CDD requirements to include high-risk sectors like crypto service providers, luxury goods traders and even football clubs. This broader scope, aligning with FATF guidelines, also mandates enhanced due diligence for Politically Exposed Persons (PEPs) and other high-risk individuals.

Automation and CDI support banks in adapting to this expansion by:

• Automatically integrating new data sources relevant to high-risk sectors, allowing compliance teams to swiftly conduct thorough CDD on a broader range of entities.
• Enabling real-time data retrieval for customer profiles, ensuring up-to-date, high-quality information for EDD processes on high-risk accounts.

Outsourcing with clear accountability

While the AML package permits compliance outsourcing, it reinforces that accountability remains with the financial institution, with further guidelines to ensure quality and consistency across outsourced functions.

With Encompass, institutions can automate data management and KYC workflows with full transparency and control. The CDI integration provides an auditable trail of compliance actions, ensuring quality standards are met even when functions are outsourced.

Balancing data privacy with compliance requirements

The package also addresses data privacy tensions under GDPR, supporting commercial purposes for processing CDD and KYC data. This clarification allows banks to maintain compliance with privacy requirements while efficiently managing risk data.

Encompass’s automated data handling processes include robust data privacy controls, allowing institutions to:

• Streamline data sharing and retrieval across departments and jurisdictions without compromising data privacy.
• Comply with GDPR by ensuring data use is transparent, secure, and restricted to regulatory needs.

A new era in AML compliance

The EU’s AML package sets a new benchmark in financial compliance, emphasizing transparency, accountability, and the role of technology-driven solutions. DT4C and Encompass provide actionable, innovative automation that simplifies compliance and strengthens financial system integrity, empowering institutions to navigate regulatory challenges with ease.

As compliance evolves, Encompass is committed to delivering solutions that help organizations proactively manage risk, meet compliance standards, and drive efficiency in a unified fight against financial crime.