Did your business encounter fines and sanctions due to ineffective AML compliance? Did you take all precautionary measures to prevent money laundering and still face fraudsters?
Have a read regarding the basics and necessities of digital AML solutions and their merits.
Money laundering has been one of the most prevalent crimes in the world in the past few years. According to UNODC, the approximate estimated amount of money that has been laundered internationally is USD 800 to USD 2 trillion. In other words, it rounds up to 2 to 5 percent of the world’s Gross Domestic Profit (GDP).
All financial sectors and government bodies continuously develop new ways and policies to combat money laundering activities and financial crimes.
Money laundering is the conversion of money acquired through unlawful activities into legal money. The biggest financial crime known as money laundering has ulterior motives of hiding the unlawful money behind legal transactions. The money is either hidden in shell companies or shares are bought from it.
Anti-money laundering by law is the prevention of money laundering activities and financial crimes. The world is full of global and local regulations that have mandated all financial institutes dealing in monetary transactions to abide by these rules. Failing to do so may lead them to face hefty fines and sanctions. As a result, all organizations are required to follow AML regulations and have to establish compliance departments. But doing so is a challenging, time-consuming task.
AML solutions and screening is the most effective risk assessment method to verify the companies existing and potential customers under AML guidelines.
- The corporate policies, controls, and procedures have to be aligned with AML rules and regulations and, if possible, adopt in-house security protocols.
- Rather than maintaining manual customer data records, businesses must shift to digital AML verification, which can verify individuals within seconds.
- Perform real-time verification that diminishes human error.
- Screen individuals through global watchlists, sanction lists, PEPs lists, and adverse media.
- Reporting all unusual transactions of customers and performing enhanced due diligence on any suspicious activity before reporting them.
- Train employees regularly and update them on new regulations. Maintain ownership throughout the company.
AML compliance screening is performed due to three purposes.
- Avoiding violation sanctions and fines
- Protecting the businesses from financial losses and then reputational loss
Businesses have to prevent their entity from facing financial losses due to money laundering sanctions and fines. All individuals that have been involved in money laundering activities have their names in sanction lists and global watch lists. Businesses need to avoid getting their names on the sanction list through anti-money laundering verification.
But now that we know why AML monitoring is beneficial let’s dig in to understand when AML compliance must be performed.
There are multiple occasions businesses go through when they have to perform AML screening on their customers. For instance, companies must perform anti-money laundering verification when onboarding customers and clients, especially when opening accounts in banks. Additionally, they are required to conduct screening when the risk associated with customers increases over time. Therefore, regular monitoring of customers and clients is also essential.
AML screening is performed by collecting the individual’s basic details, such as their full name and age. Then the person is required to upload their ID documents such as passports, ID card details, and other necessary details. These documents are first verified and authenticated then the image provided is checked for any fakes. After the verification, the individual’s name is checked against multiple worldwide sanction lists and global watch lists. They are also checked if they are ultimate beneficial owners, and if they are, their transactions are regularly monitored.
Manual AML solutions have many drawbacks, such as the following
- They are costly because businesses have to hire extra workforce
- They are prone to human error and misses because, well, human beings are imperfect
But there are multiple perks to digital AML compliance verification, such as
- Designed through artificial intelligence, which is programmed to assist human beings
- Can perform deep checks, fake checks
- Stays up to date with the changing regulations
- A fast and robust procedure
AML guidelines are essential to deter fraud and money laundering activities. The sanctions imposed by the government and global authorities are to provide benefits to the world’s economy. Digital AML solutions are the way towards better, faster, and better AML compliance.