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The FinCrime Files – Q&A with András Bácsfalvi, Chief Compliance Officer at MKB Bank

In the latest of our FinCrime Files interviews, we caught up with András Bácsfalvi, Chief Compliance Officer at MKB Bank. He discusses his view on releasing UBO registers in the EU, developments in AML since the cornonavirus outbreak and how banks and fintechs can cooperate to battle money laundering.

Hi András, could you tell us a little about yourself and the current positions that you hold as a compliance and AML professional in the banking sector?

I am the Chief Compliance Officer of MKB Bank, which is one of the biggest financial institutions in Hungary. The directorate I lead comprises of three departments: one for classic compliance functions (handling conflict of interest, ensuring ethical business conduct, consumer protection etc.), one for AML/CFT and KYC, and one for capital markets compliance. Before my present workplace, I worked for the Hungarian Export Credit Agency as a Compliance Director.

I am also a president of the Hungarian Banking Associations AML & Compliance working group and the Hungarian Corporate Compliance Committee’s banking working group, as well as being a member of ACAMS as a Certified Anti Money Laundering Specialist. I also act as a lecturer for Compliance and AML/CFT courses organized by the Budapest Institution of Banking and at the University of Miskolc. Oh, yes, and most importantly I am the father of the cutest 5 year old boy.

As part of the Fifth Anti-Money Laundering Directive which went into effect in January 2020, EU member states are releasing registers of UBOs (Ultimate Beneficial Ownership). What are your thoughts on this – can they be successful in helping financial investigations?

I think it is definitely a good step, and it can help in preventing and/or investigating financial crimes. The problem is that these registers are still not available in some countries (among them my home country), and the EU is not strict enough to force all member states to comply. I hope that every kind of company (LPs, LLPs, family trusts etc.) that are liable for tax evasion are required to register!

In our recent AML/KYC survey, 85% of respondents admitted to using Google for due diligence or investigative work. How much do you find yourself using Google as opposed to dedicated data/premium data sources?

If you deem your company serious enough, using only Google is simply not enough to fulfil your CDD obligations. There is no serious financial institution on Earth that doesn’t use some premium database. As I see it, there are more and more competitors for WordCheck, Dow Jones, WorldCompliance etc arising, so I hope that these databases will be available for everyone, and the small companies can afford to satisfy their CDD tasks sufficiently.

One of the many positions you hold is being a mentor to FinTech companies incubated by MKB Bank – how do you see the future of financial institutions and fintech companies working together (or not) to combat money laundering?

First of all, banks have to choose a strategy of competition or co-operation. FinTech companies are aiming new markets, either with new products or new customer groups. Exploring these markets may be more successful with the proper partners. Cooperation with FinTech companies involves several units of any bank, but compliance departments play a key role, because integrating the experience and capabilities of compliance is crucial to set up a solid basis for the business. However, the lack of legislation and licensing is a key risk factor.

There can be many ways of cooperation: opening a standardized API for partners is a key to access the data property of the bank. On the other hand, startup incubation is also a way of creating the basis for common business opportunities. Both ways of operation have to be supported by compliance professionals in order to achieve the ambitious goals of FinTech companies without putting the stability of the traditional banks at risk.

All in all, banks have to hear the sound of the future, but FinTechs must comply with the rules. It is my pleasure to say that, in Hungary, MKB Bank is playing a key role in incubation and the cooperation with FinTech startups and innovations.

In more topical news, how do you feel the coronavirus has affected the need for effective AML systems that are entirely cloud-based and accessible remotely?

The compliance function plays an important role in the institutional realization of prudent operation. Even after the declaration of the emergency phase, even through carrying out its wide-ranging general tasks it must demonstrate its ability to adapt dynamically to sudden circumstances as well. In order to ensure that operations work properly, it is not enough to simply step in. For example, with the introduction of government measures, but also to develop forward-looking strategies to identify and manage emerging risks.

Due to the economic – in particular national economic – effects of the epidemiological situation, a changed environment has emerged. As a consequence there must be ready-to-respond answers to developments in the field of capital markets, to the new challenges of anti-money laundering, or, where appropriate, the increased role of consumer protection expectations.

In light of the above, Compliance must do its job as it has done so far – monitoring changes in international trends and assisting the bank in regulatory compliance in an uncertain regulatory environment, by finding and applying best market practices, and during the period of realignment after the end of the emergency phase. So Compliance is managing the situation, continuously assessing and anticipating the possible outcomes. Moreover it considers it to be a priority to identify the risks involved, and the proactive solutions it can offer, to ensure the continuity of the compliant business.

What I see is this: the importance of Compliance and AML is growing because they play a crucial role in online onboarding, remote KYC procedures, transaction screening, sanction compliance, customer protection, capital markets compliance etc.

You are a regular speaker at industry events worldwide – which key influencers/podcasts/books do you recommend to keep up-to-date with the latest developments in AML and financial crime?

I like the books of Jeffrey Robinson, because they are not just for professionals and they can be interesting for everyone. My favorite compliance influencer is Eric T. Young, the former CCO of BNP Paribas. I listen to many AML and Compliance podcasts, the best ones are: AML Conversations, AML Talk Show, Financial Crime Matters and The Compliance Times. I intend to start the first Compliance and AML podcast in Hungarian in June.