With the advent of new technologies in the corporate industry, the market has become competitive. Not only that, but bad actors have also adopted clever ways to perform a series of sophisticated crimes. In order to better understand how financial organizations, combat these criminals, it is important to know what Anti Money Laundering (AML) means. For businesses. anti-money laundering systems are mandatory to perform a proper risk assessment of onboarding customers and keeping intact compliance standards

anti-money laundering

That being said, criminal activities including money laundering and those related to it, such as drug and human trafficking, tax evasion, bribery, and corruption, etc. can be e reduced significantly. AML Solutions offered by service providers in the market could prove a good bet for businesses that are looking to onboard customers that are honest and transparent in their financial upholding. 

What is AML Compliance?

Anti-money laundering compliance is a set of everything ranging from regulations, procedures, and policies to their implementation, compliance, and maintenance. AML compliance is usually a lawful obligation for corporate entities to prevent money launderers from breaching the legal financial system. Businesses that are looking forward to establishing ties with partner entities and customers are directed to perform AML verification to take down cybercrime, identity theft, and other related nefarious activities.

The famous banking term, “Know Your Customer” is part of the greater AML compliance umbrella. Through KYC, customers are verified using their identity documents issued by the government, and their facial identity is also cross-checked for foolproof verification.

Authorities Responsible for AML Compliance

The AML compliance law issued by the government of the United States, Bank Secrecy Act of 1970 or BSA, is state-of-the-art legislation that enables financial organizations to prevent monetary crime on a daily basis. This framework allows businesses to develop a robust mechanism to enforce policies and implement procedures that best align with anti-money laundering obligations set forth by financial regulators, allowing them to cut off ties with criminals, and only onboarding legitimate customers.

The Bank Secrecy Act is usually part of an AML compliance program of a company that it develops to prevent financial crime. Through BSA, entities like banks can develop a proper reporting system by which suspicious activities on behalf of customers can be reported to responsible authorities. Also, customers with a fake identity detected during customer onboarding can be reported.

What is FinCEN responsible for?

The Financial Crimes Enforcement Network (FinCEN) is the US regulatory watchdog that is responsible for the safe functioning of the financial industry. It also keeps checks on organizations and businesses that are operating in the financial sector; whether they are in compliance with rules and regulations or not. Enforcing proper anti-money laundering requirements across the US and collecting Suspicious Activity Reports (SARs), FinCEN is purpose-built for taking down criminals and their networks

FinCEN also collaborates with other similar regulatory bodies around the world to make sure that financial crime is taken down on time before it causes significant loss. It makes sure organizations are AML-compliant with state regulations such as the US Patriot Act and the Bank Secrecy Act.

What Role Does FATF Play?

The Financial Action Task Force (FATF) was established to curb money laundering and activities related to it.  The regulatory body came into existence in 1989 to speed up its efforts in Countering the Financing of Terrorism (CFT) after the infamous 9/11 attacks on the World Trade Center took place. This is because, money launderers mostly used the ill-obtained cash to carry out organized crime and funding terrorist organizations, transporting humans illegally, and performing embezzlement which is of great concern.

The 40 recommendations issued by FATF are guidelines for anti-money laundering that countries and organizations can utilize to combat financial crime and develop and implement their own action plans.

What is AML Compliance Today?

According to the United Nations Office on Drugs and Crime (UNODC), the total money laundered each year is equal to 5% of the global GDP that accounts for 2 trillion United States dollars. The money initially enters the legal financial system and is sent over various channels, called layering, to remove its original source. Anti-money laundering compliance solutions are built around the purpose to track these suspicious transactions and prevent money laundering in the first place so that other heinous crimes cannot be conducted.

Benefits of an Anti-Money Laundering software

Intelligent anti-money laundering software built using artificial Intelligence and comprehensive watch lists, sanction lists, and blacklists allows financial organizations to assess high-risk entities and customers from high-risk countries. These AML solutions eventually help in preventing digital fraud and other financial crimes. Below are some advantages of anti-money laundering software:

  • It creates a better brand image for a company
  • Businesses can avoid non-compliance penalties
  • It helps build better customer trust
  • Compliance with globally set rules and regulations
  •  Proper risk assessment of onboarding customers