Anti-Money Laundering Compliance (AML) refers to a set of regulations, procedures and laws that serve to prevent criminal activity in the finance space. Specifically, AML finance procedures prevent criminals from disguising illegal finances and passing them off as legitimate income, ergo money laundering.
Money laundering is commonly done through a legitimate cash-based business, depositing cash into foreign countries, or by investing criminally obtained money. AML finance regulations seek to track and prevent market manipulation, tax evasion, illegal goods trading, terrorism financing, and corruption of public funds.
Since its formation in 1989, the Financial Action Task Force has issued the majority of such global anti-money laundering compliance laws and guidance. Almost every bank employee will receive training for AML finance procedures and are legally obliged to report suspicious activities. For example, verifying the origin or large sums, and reporting large cash transactions. Although, many banks feel AML procedures are often ineffective and generally not cost-effective.
There is also an abundance of anti-money laundering compliance software available to automatically detect signs of illegal activity, for example, the United Nations Office on Drugs & Crime provides guidance and AML software as a preventative measure. By tracing transactions, when embezzled money is identified, it can usually be traced back to determine the victim of the crime.
AML regulations are often an obligation for banks and financial organisations to monitor and execute AML requirements. Such anti-money laundering compliance will include:
Certain non-financial institutions will also be required to do AML finance reports, so keeping meticulous records to track your payments and transfers is generally the best practice. Often the guidance for AML requirements takes the form of risk-based financial procedures, organisations are tasked to reasonably verify the identity of each customer and assess logical consistencies of such client information for the purpose of AML. Due diligence must also be taken to monitor transfers, particularly from customers to third-party accounts which are considered an AML ‘red flag’. It is the institution’s independent responsibility to comply with suspicious activity reporting to the relevant agency.
Financial institutions are implored to implement AML compliance programs. The purpose of this is to detect and report suspicious activity that could indicate money laundering. While it could be argued that AML finance laws and requirements only scratch the surface in terms of what the AML procedures cover, the counterpoint is that their implications reach much farther afield. While the nature of the activity and regional regulations can alter the requirements and reporting compliance, the general methodology remains the same.
Have an anti-money laundering compliance program in writing, that outlines:
For more information on payment transfer tracking and reporting, in order to comply with AML finance compliance, get in touch with Imburse Payments today.