Anti-Money Laundry Compliance Checks-Importance and Varied Aspects of AML Compliance

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AML compliance is the process involving background screening and allowing ongoing monitoring of the customers to remove all the aspects of all the money laundering. Anti-money laundry compliance checks help to safe onboarding of the clients. The customer gets screened through several checklists of PEPs, and sanctions. AML screening is a part of the KYC process and is require several industries like banks, fintech industries, art, real estate and precious metal dealers and gaming platforms and cryptocurrency.

Anti-Money Laundry Compliance Checks-Importance and Varied Aspects of AML Compliance

Anti-money laundering regulations

AML regulations are a set of rules for business, institutions and also for countries that must eliminate terrorist funding and money laundering activities. Earlier, AML compliance was also implemented in financial institutions to limit drug trafficking. The earlier motive of the AML regulations was implemented in the initial motive was controlling drug trafficking by controlling the flow of black money. However, later on, the crimes have become more advanced a highly strict anti-money laundering rules have been implemented.

It is essential to counter financial terrorism and anti-money laundering that are global concerns. Authorities like eh World Bank and FATF are collaborating with the authorities.

2019 was a great year with the formation of several layers by the lawmakers. In the year 2020, the AML laws were changed, and it shaped AML compliance in 2020.

Importance of AML compliance

AML compliance is not merely a regulatory burden, but it comprises of the stringent laws that can bring several benefits to your business. AML compliance checks are the main resource for risk prevention.

Fraud prevention: The fraudulent activities have been on the rise with a technological shift in the financial structure and an increase in the online payments that has increased manifold. Fraudsters are exploiting every loophole in the AML compliance of the banks and the businesses. The investigators in the UK found that there have been 2000 phishing attempts related to COVID 19 in 2020. The National Fraud Intelligence Bureau reported that 509 fraud cases up till now with losses amounting to $ 1.6 million.

The KYC and AML prospects help in preventing these frauds. Otherwise, it is going to bomb the banks and the businesses with chargebacks on other kinds of claims.

Non-compliance leads to loss: Non-compliance will lead to losses like penalties and the monetary loss as these serve as money launderers. The fines due to non-compliance have been quite high. However, they were not limited to monetary fines, temporary and permanent closure of the business, loss of credit rating and more.

Customer value: Customers can feel significantly secure with the banks and businesses and taking the necessary security measures to prevent fraud. Banks and businesses that have an inadequate preparation for AML will lead to loss of customer and merit value. Developing a comprehensive AML program is essential to prevent money laundering.

AML compliance program

What is an AML compliance program?

AML compliance involves a pre-defined program of the company-specific AML procedures. The AML regulations vary with the industries and jurisdictions. But, there are undoubtedly important aspects of the AML compliance program.

  • Policies: There are several devices used by companies and banks that one must use the AML compliance checks. These include the AML compliance measures that one will take to prevent money laundering. There are several considerations when it comes to performing AML screening on the customers and also the risk of the customers. The company will also decide an update period needed to develop internal solutions for AML screening while developing the AML screening software.
  • AML compliance officer and compliance development: It is important to allocate a person for a compliance officer. You must designate one person for owning the system while ensuring that the processes get updated and followed. This person is going to file the reports, do the training correctly, and ensure that the system runs smoothly. You must consider a senior level individual having the power to influence the company on various matters. The compliance officer is the person responsible for the success of the organization from a financial and reputational point of view.
  • Training: It is necessary to train every employee dealing with the customers and the carrying out transactions so that they understand the policies and the procedures of your company. The company must understand the legal requirements, techniques used by the money launderers. It is essential to make checks and to report suspicious activities. Remember, that training is not a one-time thing. It is a continuous process to keep your staff vigilant and informed. It ensures that your program is up to date. It is easy to become complacent if things are running smoothly. Unfortunately, when you find the problem, it might be too late. It is important to have an independent expert or someone not associated with a day-to-day review of the compliance operations to get an audit. Make sure that you review your anti-money laundering program regularly.
  • AML red flags: There are several odd situations to watch for. Money laundering is all about legitimizing the illegal funds. Therefore, an anti-money laundering activity indicates money coming from illegal resources. Make sure that you look for any unusual activities like large cash transactions, a large volume of transactions indicating layering of the transactions. Also, check for transactions with cash-heavy businesses like gambling or transactions with jurisdictions having a history of money laundering as well as transactions with individuals known to be money launders. These processes are noticeable applying initial due diligence processes and also with an ongoing monitoring procedure. You must set up a process and a baseline for determining if something needs to be looked at. An internal examination and an external report to the regulators are not indicative of a red flag. Filing a report does not involve a solution to a problem.
  • AML screening: Detecting and managing problematic accounts is one way of mitigating the risk of money laundering. It is necessary to perform complete identity verification while lowering the risk of the frauds, compliance rules breaking, risk of dealing with wrong clients and many and more. When a wrongly onboarded client passes the initial checks, the castrat assessing your fraud test after passing the gates set up for them. Fraudsters are becoming more and more sophisticated day-by-day with money launders and terrorists getting an additional capability to identify your weak links in the KYC/ AML compliance links. This means that your organization must have a comprehensive AML screening program that requires gathering information from varied government resources and international law enforcement agencies.

Read further to understand the anti-money laundry compliance checks and how money laundering can be prevented by reaching out to the experts at Wallex Trust.

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