Last year, Mr. Ken Ofori-Atta, Ghana’s Finance Minister, stated that Ghana is considering measures to deepen collaborations between the Ghana Revenue Authority (GRA), the Forensic Unit of the Criminal Investigations Department and the Financial Intelligence Centre. This collaboration should ensure greater visibility of financial crime activities. In addition, an independent prosecutor will be appointed to address those suspected of financial crimes, which will be considered a felony. This approach will certainly support financial crime mitigation, but is it enough?
The FATF blacklisting risk
The challenge of financial crime in Ghana is a dire one. Just prior to Mr Ofori-Atta’s statement, the country was highlighted by a report from the US State Department as one of the few where money laundering activities grew in 2016. In addition, there were two high profile money laundering convictions that same year. The report also found that, although Ghana’s Anti-Money Laundering Law (AML) is largely compliant with international standards, these laws were rarely applied.
This report led to concerns that Ghana would once again risk being FATF blacklisted in the West African sub-region. Blacklisting would negatively impact the countries’ economy considerably from an international trading perspective, and in turn impact banks in Ghana, both in terms of profit and efficiency. The Ghanaian government is now making headways to avoid blacklisting. It is likely that banks will in time be more accountable where insufficient financial crime mitigation provisions are available. We are soon likely to see associated fines and even criminal prosecution of those that do not adhere to international standards etc. Banks in Ghana now need to take financial crime mitigation very seriously, so what do they need to do to protect themselves?
The challenge for Ghana
The evolving money laundering methods, embargoed countries, evolving sanctions regulations and complying with frequently updated lists and AML (anti-money laundering) procedures mean that monitoring is continually challenging. While in Ghana, and elsewhere within the region, there are some established legal provisions relating to AML and counter terrorist financing (CFT), at present these are not specialized stand-alone laws. These legal provisions are in fact usually embedded into general criminal offence frameworks, raising problems of their applicability to identify complex crimes.
In addition the implementation of such measures may also be a challenge as some banks struggle with problems regarding capacity, resources and law enforcement. Some of these elements cannot be easily addresses, however, an efficient and intelligent software solution can reduce resources, make it easier to adhere to laws and agreed best practice approaches. A flexible workflow management framework, with the ability to respond to changing customer profiles, changing types of transactions and new legislation should also be considered.
The cost of financial crime mitigation may also be a challenge. In particular, where institutions serve the poorest parts of the population, including microfinance institutions, cooperatives and rural/agricultural banks. However, there are solutions available to meet the needs of specific institutions or sectors and consider all elements to reduce costs where possible. For example, a lot of these smaller banks don’t want to pay for a list subscription. A knowledgebase can be created to support these banks, offering a list of both private and public lists for them to access.
The sanction screening challenge
For a system to function effectively, factors, such as the wide variety of languages used, or country names, also need to be considered. Effective software screening solutions use lexical analysis to match against not only country name variations, ISO country codes and deductions from city names, but also free text descriptions and financial identifiers. The solution must be sufficiently agile to spot even the slightest irregularity, utilizing features such as ‘relaxed pattern matching’, where words are compared with a tolerance for approximation. Again, flexibility is key, as every institution will have its own needs, and rules may need to be applied according to requirements such as geographical area or business line.
The challenge of constant change in Money laundering patterns
We should also consider education as well. With FATF directives often being the main focus, the real challenges specific to banks individual situations are often overlooked. Even when a bank has a sophisticated, agile software solution to effectively identify true money laundering cases, the systems in place need to be supported to continually adapt. Only then can optimum results be realised. At Temenos, part of the product licencing requires us to go back to clients every six months to re-teach and re-calibrate because we want our banks to use our products the right way. When banks do not use products correctly it leads to assumptions of inefficiency and errors; these are issues that can be easily addresses with education and review.
The accuracy VS false positives challenge
Software should also be sufficiently intelligent to identify when a transaction is matched up legitimately yet there isn’t a sanction applied or an incident of money laundering. Potentially good customers may be treated unfairly unless they are identified as ‘false positives’ quickly and addressed effectively. It is therefore essential that software with a very low ‘false-positive’ alert rate while maintaining the requisite accuracy.
Overcoming the challenges
The right software should be able to effectively consider all the challenges listed and evolve with the changing environment. It should screen a customer database, payments and any other type of transaction, and compare these against sanctions lists and customer profiles. At the end of the day, the right solution should go beyond addressing all the challenges African banks are facing. At Temenos, we have a suite of several applications that address the different issues discussed. In fact, we recently implemented with a Ghanaian bank who was focused on a comprehensive strategy for growth that needed to address these very same issues. These are common yet complex challenges, but the right solution should support a banks’ needs enabling them to focus on their customers with minimum impact from criminal activity. Thus the cycle is broken, the challenges are addressed and everyone is happy.
Ghana’s economic outlook is positive, the measures the government is taking to prevent financial crime is another step toward underpinning economic stability and growth. At Temenos we recognise how technology is an enabler in terms of improving protection, customer service and managing cost but this has to be driven by good governance, education and people.