Money laundering is a procedure where fraudsters attempt to hide and conceal the possession and origin of their earnings of criminal activities whereby they keep away from stopping prosecution, requisition, and conviction of the fraudsters funds.
Money laundering is a significant financial offence that is implemented by white collars and steet-like lawbreakers alike. There are several enterprises that are involved in money laundering, for example, banks, financial institutions, gaming industry, ecommerce platforms and fintech companies etc. It is only possible if the organizations are lacking on AML screening and AML compliance programs are not continuously updated with ever changing money laundering hazards.
There are several ways to conduct money laundering but generally three layers are involved.
Money laundering is divided into three sub categories which is placement,layering and integration. First stage is placement in which the illegal money is placed in legitimate enterprises such as banks. In the second stage several financial enterprises are made through the trading of financial and non-financial assets to exploit the place of origin of money. Lastly, illegitimate money is unified into legitimate money through legal channels which shows it either as the profit of a shell company or acquire gain from the sale of assets.
What is anti money laundering compliance?
AML compliance is the procedure of background screening and ongoing monitoring of clients to recognize and diminish any efforts of money laundering. The client is screened against sanction lists, global watchlist and politically exposed people lists. KYC verification is a part of anti money laundering screening and is compulsory for various industries such as cryptocurrency, real estate, stock exchanges and ecommerce platforms.
The initial strategy was to control drug trafficking by controlling illegitimate movement of illegal money. After a while, crime became more strengthened and strict AML laundering regulations were passed.
AML and combating financing of terrorism (cft) are worldwide issues. International regulators such as the financial action task force and world bank are uniting together with national regulators such as FINMA,UN,EU,FINCEN etc to control money laundering.
There is not a single AML verification act to narrate every country has its own regulations,but mostly are following the 40 recommendations of the financial action task force. FATF is a global jurisdiction that gives guidance to countries regarding their efforts to take hold of money laundering and terrorist financing.
AML compliance program
Anti money laundering program is the predetermined procedure of organization- specific AML compliance measures. Although regulations vary with laws and organizations, a few compulsory aspects of AML compliance programs are present in all.
1. Policies
First of all the organizations and financial institutions must develop their anti money laundering compliance regulations. Which will prevent money laundering and malicious attacks. How they will conduct AML screening on clients, how frequently client risk rating will continuously be modernized. In this process, the organization will decide whether they want to opt for an internal solution or opt for AML screening software.
2. Compliance department
Organization must have an AML compliance department since it is absolutely necessary. The person must have comprehensive knowledge of AML laws and industry know how. Anti money laundering collaborates with other departments and keeps them well informed about change in AML screening practices. He must be in charge of unusual transactions of payment of customers.
3. Staff training
Sometimes the employees are blackmailed by lawbreaker entities to transfer illegitimate money. It is vital to teach employees how to recognize such clients and what would be the circumstances of helping such individuals.
4. Client AML screening
After the AML policies are created and an anti money laundering compliance officer is hired and trained, which is when AML screening starts. AML screening is usually carried out along with Know your customer verification at the time of account opening.
Every business can get customized solutions according to their needs to satisfy the identity of an individual within seconds and increase user experience. The cost of complying with AML is low and applied requirements for integration are relatively easy.
To conclude this, AML is unavoidable due to regulatory requirements and to develop your organization in a safe environment without the fear of malicious attacks or non-compliance penalties. It is a contemporary investment that promises long term benefits.