AML stands for anti-money laundering and it is very important for financial businesses from all around the world. Strict AML regulatory procedures exist and it is normal to see this happen because money laundering is a huge financial problem all around the world. Regulation needs to be very strict and all businesses are now faced with a pressure that is increased and coming from authorities. AML aims to assist the business to achieve compliance with anti-money laundering.
Understanding Anti-Money Laundering
The term refers to a strict set of regulations, laws, and procedures that were created in order to prevent the criminals from disguising funds that were illegally obtained as being legitimate income. With the use of AML laws, many transactions and different criminal behaviors are covered, with far-reaching implications.
As an example, AML regulations force the bank and many other financial institutions to check the identity of their customers. This applies in various situations, including opening a deposit account or making a larger financial transaction.
Developing AML Programs
AML compliance programs are sometimes very complicated. However, they have to be respected at all costs. Developing this program needs to involve different steps, like the following:
- Suspicious activity detection
Suspicious activity needs to be detected with the goal always being to detect any activity that is associated with possible money laundering. For instance, substantial cash deposit increases for a business or individual can be labeled as being suspicious when there is no apparent reason identified.
- Risk assessment
This offers an understanding of different customer tiers, according to associated risks. The business needs to determine if the customer is high-risk or low-risk, all based on scoring models. The model has to consider many risk factors, like EDD, PEPs or geographical location. Due diligence is a process that has to be guided through the information that is provided by regulators inside the jurisdiction of the company.
- Internal Controls
These are policies that aim to mitigate money laundering risks and have to support compliance with all regulations. Many laws and regulations need to be respected, with internal controls being applied through due diligence screenings, the process of establishing responsibilities, and reporting any suspicious activity, among many other things.
- Compliance Training Programs
It is very important that employees become familiar with the mandatory AML legislation. This includes obligations and roles. Ideal AML training programs have to be interactive and should be regularly done. When this is not in place, problems can appear because employees make mistakes without being aware of it.
Who should be trained is not randomly decided. Companies need to assign advanced training levels to the staff that is involved in areas of high AML risk. This can include the staff that has direct contact with the customer, audit staff, compliance staff, operational teams, senior management and experts in the subject.
AML compliance is mandatory these days and you have to be sure that the business respects the law. When this does not happen, fees can easily appear because laws are broken.