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Anti Money Laundering – How to Track Illegally Obtained Funds

It is best for both the organization and the clients/customers if Anti Money Laundering procedures are implemented.

The Need For Anti Money Laundering

Anti Money Laundering procedures have been around since 1989 when organizations from countries around the world formed the Financial Action Task Force(FATF) and they devised international standards to prevent money laundering. The International Monetary Fund(IMF) has also pressed its 189 member countries to comply with Anti Money Laundering regulations.

Money laundering is a common thing in banks, stock exchanges, and real estate, etc. So all businesses and organizations should have updated AML Compliance programs and AML solutions, that include background AML Screening to identify and put an end to any efforts of money laundering.

Initially, these systems were implemented only in the financial sector to stop crimes like drug trafficking, but with crimes becoming more advanced, almost all types of organizations have to comply with the laws of Anti Money Laundering. Money launderers usually switch accounts or keep shifting their money in order to avoid getting caught. But AML systems impose a holding period, so the amount has to stay in the account for about five trading days. In this way, at least money laundering using accounts is prevented.

How AML Systems Work

Using a mix of Artificial Intelligence and Human Intelligence, AML Monitoring and AML Verification collect the user’s personal information and confirms their identity by matching it with the database records. The latest technology allows this to be done in real-time. Using the collected data the system marks the high-risk identities of the users who have suspicious records.

AML Screening solution screens against global watchlists and is a part of KYC (Know Your Customer) Verification. Regulators require businesses and companies to know their customers better in order to prevent money laundering and other such crimes. If the organization does not have proper AML Security systems then they will not know whether the customer is a terrorist or a money launderer and they might unknowingly aid terrorist activities, and it will be a serious crime for which the company will have to pay. But if the company does use Anti Money Laundering software, they can detect suspicious transactions and block that particular customer/client.

In other procedures, institutions are required to report suspicious transactions that include amounts of more than USD$10,000. Such amounts themselves raise suspicions about money laundering. Apart from these Know Your Customer procedures, organizations can also apply for Customer Due Diligence to understand the risks related to their customers, specially PEPs(Political-exposed people), who are high-risk customers.

Why Is AML Compliance Important?

Financial institutions unknowingly play a role in financial crimes because they don’t know the people they deal with. A huge amount of money is laundered through the financial system. For this reason, it is very important for all organizations to follow Anti Money Laundering solutions and follow AML Compliance procedures.

Apart from this, companies that do not comply with AML regulations are fined as well. Quite a lot of money is given as AML fines and the amount keeps on increasing with the passing years. 2020 has also seen an increase in the amount of AML fines, and most of the penalties are being received by banks.

Employees of the organizations are sometimes manipulated to get involved in money laundering by transferring black money, so the institutions need to train their employees in such a way that they are able to identify who they are dealing with and where the money is coming from.

As Anti Money Laundering regulations are continuously updated, it can sometimes be difficult for companies to comply with AML regulations. Thousands of watchlists and sanctions around the world have a lot of criminals on them, and companies obviously would not want any of those people to be their customers. Therefore, it is an absolute necessity to follow AML Compliance regulations.

To wrap it up, Anti Money Laundering is indeed a compulsory process, as the financial system of the world cannot function properly without it. Not only that, the companies which follow AML Compliance regulations also get more brand awareness as customers see the business as safe. On the other hand, companies that have already been fined will not be considered trustworthy. It is best for both the organization and the clients/customers if Anti Money Laundering procedures are implemented.


Fawad Malik

Fawad Malik Technology geek by heart, blogger by passion and founder of nogentech dot org. He is an expert in enlightening the latest technology reviews and news to the world and community built around the Nogentech. He also helps people build quality backlinks.
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