“AML pendulum: towards equilibrium”, speech by Jekaterina Govina
Jekaterina Govina, Director of the Financial Market Supervision Service, took part in ACAMS Anti-Financial Crime Virtual Symposium Baltics on 31 March 2021. She delivered the keynote speech “AML pendulum: towards equilibrium”.
Good morning everyone. It is a great pleasure to share with you my thoughts and at the same time it is a great pity I can do it only virtually.
My keynote is about the reality that we were (and still are) observing in the region for the last 3-5 years and what we should do about that.
By the way, this is how a pendulum looks like. For me, it symbolises the swinging in the financial market’s approach towards AML from one side (more liberal and flexible approach) to the other (conservative), until it reaches the state of equilibrium.
So that is the past and some headlines from the most significant recent cases where Scandinavian banks were sanctioned or are being investigated because of loose AML controls that caused (mainly) reputational damage to the region. And we feel the consequences of that right now.
So, besides the struggle of financial companies and specifically banks themselves to obtain and maintain correspondent banking relationships, the consequences are that some of the categories of clients, like NGOs, companies trading with counterparties from third countries, even ordinary people, face difficulties dealing with banks. And although in most cases it seems to be justifiable, there are some cases where the pendulum is far from the equilibrium.
And it is not only the case in the Nordic-Baltic region, but rather a much wider issue. Even the European Banking Authority and the Financial Action Task Force (FATF) recognise that the issue is worth examining further. The FATF just recently announced that it is going to launch the initiative “mitigating the unintended consequences of the FATF standards”, analysing the issue of de risking, financial exclusion, etc. Here in Lithuania, we are investigating the de risking phenomenon as well – to understand the reasons and the affected part of the society. We are going to share our findings by the end of this year.
Let’s move to the desirable equilibrium of the state of affairs. I do not believe in a world with no criminals and no money laundering or terrorist financing. There was such, but it was a long time ago - before Adam bit the forbidden fruit. And as we have been exiled from paradise from that moment, we must accept the world as it is. With its good and evil.
Nevertheless, I believe in a world that maximises its efforts and potential to be the best possible one.
And in the AML area, the gravitational force that should attract the pendulum to the state of equilibrium is the demands of our society. And the demands are obvious– to have access to a payment account, to trade freely and so on.
And thinking about the restoring force of the pendulum, I think more and more people come to the conclusion that it should be the partnerships: greater collaboration within the private sector (among banks, between banks and fintech companies), between the private sector and the public sector, and between public sector authorities both on a national and a supranational level.
And here I would like to take the chance and announce about the project that I personally and my team were working very hard on and are especially proud of – the Centre of Excellence in AML. I am very proud to announce that we have just reached the final stage to establish the next level partnership: approved the Centre’s CEO, so the Centre will start operations in the coming months.
Thank you for your attention. I wish you an interesting conference and a promising partnership.
To maximise our efforts to achieve equilibrium.