Money laundering is a prevalent issue of the digital age. According to UNODC, about 800 billion dollars to 2 trillion dollars is laundered each year globally. Governments and businesses are searching for new ways to counter money laundering as well as other financial crimes. Thus, Anti Money Laundering policies have been developed, by the authorities, to enhance their efforts to fight this issue. When in place, AML solutions not only prevent online sectors from financial crimes and fraud but also protect them from paying hefty fines and penalties.
What is Money Laundering?
Truly speaking, money laundering is a crime, a major financial crime. It is a process of acquiring money from illegal means and then passing it through legitimate bodies such as banks to make it seem clean. The main objective of this scheme is to turn all the illegal assets into white money and return it to a launderer in an indirect and obscure way. As technology is advancing, so do the money laundering strategies.
What Does “Anti-Money Laundering” Mean?
Anti-Money Laundering, abbreviated as AML, is all the policies, laws, and regulations to combat financial crimes. Global and local regulatory bodies have been established to check the prevalent financial crimes in the region and devise policies to catch the criminals and also prevent such crimes from happening. Each and every sector is obliged to follow Anti-Money Laundering regulations. For that, sectors need to establish compliance departments to check whether the organizations are complying with the regulations by performing AML screening or not.
What Does “AML Screening” Mean?
Anti-Money Laundering screening is running a risk assessment on the organization’s potential or existing clients under AML guidelines. What AML screening does is that it ensures that the organization’s potential or existing clients are not in any of the wanted, banned, PEPs, or sanction lists. Screening the customer is the key element of the AML compliance program.
The objective of AML Monitoring
The main purpose why AML monitoring is performed is as under:
- Protection from heavy regulatory fines
- Avoid violating sanctions
- Make risk assessment
Individuals whose names appear in any of the wanted or sanction lists, particularly those who appear in the Politically Exposed Person’s list, are high-risk profiles for any organization. PEP individuals have a greater opportunity to commit financial crimes including bribery and corruption than those present in other lists. Thus, the financial sector and banks are required to screen each and every client so that they may know who is the risk profile and should not do any business with them.
When AML Screening is Performed?
Several instances in which organizations have to run AML verification is as under:
- Organizations have to ensure AML security while opening the accounts.
- Companies should run AML screening during the onboarding procedure.
- As technology is advancing, so are the criminal strategies. The client’s risk level changes with time and the businesses need to regularly check their clients through AML screening.
- Organizations also need to check the UBOs of the firm they are planning to start a business with.
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How to Perform AML Screening?
For AML screening, the individual is asked to provide their full name as well as their date of birth. Then the AML solution screens the name of that individual against all the watches as well as sanction lists, to ensure that they are not present in the list and are not a risk profile for the business.
How to Make AML Systems Effective?
Manually monitoring any individual is just a waste of time as well as the organization’s resources. Technologically advanced services make the process of AML monitoring faster and easier for any business. They also have access to global regulatory databases such as PEPS, watch lists, and sanction data which enhances the reliability of the verification procedure. So, such solutions not only help the online sectors to prevent themselves from any criminal and fraudulent activities but also help the sectors to follow AML compliance more effectively.
In this digital age, where criminal and fraudulent activities have become so common, AML solutions are the best choice whether it is a financial institute or any other. They besides providing superior security, also help different sectors to comply with the global regulations and save themselves from penalties and hefty fines. Thus, all the sectors need an effective Anti Money Laundering solution that could filter out any individual who seems a risk profile and could pose a threat to the company.