Compliance Truths: How Cognito Supports Compliance Officers and AML Programs

By Cognito Team on October 7, 2020

Like any compliance officer, Matt Mehlman has a lot to keep track of. A consultant with iLex Consulting Group, LLC, he works with multiple fintech companies as a specialist in compliance oversight. Many startups aren’t going to hire a Chief Compliance Officer before they hit their growth stride — yet being in compliance is crucial to their survival. That’s particularly true when it comes to anti-money laundering (AML) policies.

“It’s the most crucial thing for a business because it’s literally how your doors stay open — one AML misstep and the government can shut you down,” says Mehlman. But beyond being vigilant for the sake of the company, AML adds value to society — something that compliance officers want their teams to understand.

“We have a duty not just to the government, but to the people of this country and to the world to do our part in stopping financial crime,” he notes. “Illicit activity is a multi-billion-dollar business, and it’s honorable for us to be able to do our part to fight it. We’re stopping bad actors from laundering money across borders where it can finance terrorism or dictatorships and compromise human rights.”

Seen from that perspective, a robust AML program is more than just a business precaution — it’s a social responsibility, and Mehlman looks to vendors who take compliance as seriously as he does. 

That’s why he recommends Cognito. The automated platform allows compliance officers to not only verify the identity of their customers, but to scan them against government watchlists. The solution uses powerful APIs and search algorithms to yield comprehensive and up-to-date data.

Compliance priorities and training

In spite of the importance of AML, business owners are often thinking of other issues which are no less urgent. “They’re not trying to solve crime — one of my clients is trying to solve underbanking and bring access to people in banking deserts,” says Mehlman. “So while they may not be focused on AML, they need to stay compliant while doing what they’re passionate about.”

The same goes for other team members who have their own business roles and goals above and beyond compliance — which is why ongoing training is so critical. “If you don’t train your employees, AML is not everyday knowledge. Most people want to avoid it and not think about it, because this is the dark side of the world we all wish wasn’t there,” says Mehlman. “But unless you understand the trends, you’ll never know how to pinpoint the red flags.”

Just as founders and employees have a range of roles and responsibilities to keep track of, so do compliance officers, who monitor everything from the transactions taking place to the content in marketing materials. “A compliance officer’s day is probably the most hectic thing I’ve seen in my life,” says Mehlman. “To have a solution like Cognito give you data quickly and simply — and to be able to have faith that you’re getting the best data — takes a huge chunk off your plate.”

For business leaders and owners, having concise, coherent reporting with tokenized results is a huge weight off, as they can hand information over to auditors without any additional hassle. “It makes the reporting part of their job so much easier, they can get back to their day-to-day role of growing their company,” says Mehlman.

Automatic and continuous screening

There are two major pain points that most companies have when it comes to AML: screening and re-screening. “The Office of Foreign Assets Control (OFAC) posts a disclaimer that their watchlists can change overnight, if not hourly,” notes Mehlman. 

This is why he recommends his clients partner with vendors who can effectively screen customers through software.

“Cognito can run an identity verification check and a watchlist check simultaneously,” he says. “This solves the need to manually search, eliminating any need for intervention altogether.”

As Mehlman notes, this saves not only time, but eliminates human error, where something as simple as a misspelled name or a momentary internet outage can derail the process.

“The other pain point Cognito solves is the regular re-scan — instead of other solutions where I would have to send through my entire customer list, Cognito takes care of re-scans automatically,” he says. “For my clients, it makes it so much more seamless and so much less time consuming. For me, it gives me freedom of my day to do other things, and it gives me more specific insight when information doesn’t match, where there was a hit, and why.”

A tool that works, a team that listens

When connecting his clients with a vendor, Mehlman evaluates the functionality and user friendliness of the solution, as well as the vendor’s knowledge. “I’ve met vendors that understand their technology but have limited understanding of the space they’re actually working in. I like that Cognito is very knowledgeable about the technology and keeps up to date on the latest AML rules. They just revamped their watchlist tool, and the features in there made everyone’s life easier. They’ve been listening to what people are saying.”

Mehlman also appreciates that Cognito is a specialist, not a generalist. “They know identity verification and AML, and how they’re going to help their clients solve those issues, and they’re very open to listening. Every update they’ve made, every new product they’ve provided, has always been with that goal in mind.” For Mehlman, being able to trust that his vendor has his clients’ best interests in mind enables him to concentrate on his critical AML work, instead of managing and oversighting third parties.

“AML is super important because without it, we’d be living in a comic book world — it would literally be Gotham City, where we would need a superhero to fight all the crime, because money can flow faster than you can imagine,” he says. “The greatest tool that I can recommend to my clients is to partner with the kind of vendors that help me do my job and make my life easier so we can all fight the good fight.”

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