Saturday, 4 April, 2020

goAML to Check Financial Crime

As per the direction by Nepal Rastra Bank (NRB), all commercial banks have adopted the goAML software since Magh 1, 2076 B.S. NRB sought to have the commercial banks install the software last year itself but at the time the banks were not ready and therefor sought some more time. NRB is also planning to get the software installed by development banks, finance companies and other financial and non-financial institutions from Asar 1, 2077 B.S.

Information exchange
The goAML (Anti-Money-Laundering System) software was developed by the United Nations Office of Drugs and Crime (UNODC) as per Nepal's commitment to the Financial Action Task Force (FATF) regarding automating the financial information unit (FIU) in 2010. The FIU, the financial intelligence unit of Nepal, was established in 2008 B.S. under the Assets (Money) Laundering Prevention Act, 2008. The FIU issues directions to banks and financial institutions regarding reporting on financial transactions so as to detect money laundering and terrorism financing activities, if any. The banks and financial institutions are required to ensure compliance with reporting requirements, failing which they will be fined. The FIU inspects the transactions and records of the banks and financial institutions. The FIU also coordinates the holding of training and awareness programmes. Further, the FIU develops an information exchange mechanism with other FIUs or allied international institutions by signing an MoU with them or through membership.
The goAML software has been adopted by the UNODC to strengthen capacity to tackle financial crime like money laundering and terrorism financing. The UNODC is hopeful that the software will help member states across the world to enhance their capacity for detecting and dealing with such financial crime in a more effective way. The software has been designed in such a way as to meet the IT requirements of FIUs of various member states irrespective of the size and volume of data to be handled. As the majority of FIUs are unable to develop the IT capacity required for data collection, processing, analysis and management, the UNODC has come forward to develop the software.
The goAML software serves as a standard and uniform AML bridgehead for banks and financial institutions to deal with money laundering and terrorism financing in a more vigorous way. It is a comprehensive IT tool; it integrates fourteen separate functions- from data collection to intelligent report writing- into one package. So it is cost-effective vis-à-vis the approach to developing one-off site-based IT solutions. Instead of using several different IT solutions, this integrated system can be used more effectively.
With the installation of the goAML software, commercial banks will have to have compatible systems in place, which need to be linked to the FIU. The banks will also have to change their internal system and upgrade their core banking system to make them compatible with the software. Now the details of all transactions of a bank will go to the software through its core banking system. The installation of this software has been necessitated by the need for banks and financial institutions to go digital to cater to the financial needs and demands of customers in a prompt and effective manner. Now, commercial banks can send reports on threshold transactions and suspicious transactions to the FIU digitally, thus obviating the need for manual submission.
One of the salient features of the goAML software is to enable banks and financial institutions to capture all transactions of a particular customer even if such transactions are made in various branches and at different times. In Nepal, a deposit of over Rs. one million has to be reported to the FIU. So some unscrupulous people or organisations may resort to smurfing so as to hide their huge deposits. Now such smurfing cannot be resorted to in commercial banks.
Banks and financial institutions have KYC details of their customers. However, such details may be lacking in the case of old accounts. In some cases, such details may be fragmentary. Now, commercial banks will have to completely update the KYC details of every depositor in that every detail will have to be fed into the goAML software. What is more, even data not sought by the FIU and other unnecessary data will have to be entered into the software. This may be taken as a hassle.
The procedures for depositing money to accounts have also changed with the installation of the goAML software. In addition to a conductor's (deposit-maker) name, signature and contact number, other details may need to be disclosed like three generation details. However, only those details that have not been submitted to a bank yet need to be disclosed. The deposit-maker may also be asked about the sources of the funds to be deposited to a particular account. Further, a third party depositing an amount of over Rs. 100,000 to an account needs to submit a copy of his/her ID to the bank. So it will consume more time than in the past while depositing money in a commercial bank.

Mandatory adoption
NRB intends that all banks and financial institutions and even non-financial institutions use the goAML software as part of the policy on anti-money laundering and combating financing of terrorism. Any entity supposed to implement the software may be fined from Rs. one million to Rs. 50 million for failing to implement the software. It may be hoped that the software will contribute greatly to making the AML regime stronger and more robust, thus discouraging financial crime like money laundering and terrorism financing. And banks and financial institutions should take the mandatory adoption of the software on a positive note rather than as a burden.

(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000. He can be reached at 

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