“AML security isn’t just about following the rules—it’s about safeguarding the integrity of your business and the trust of your clients in a world where financial crime hides in the shadows”
Financial Institutions have to monitor thousands of transactions daily. The number of new clients onboarded isn’t less in reputed banks and financial institutions. So, such a huge number of transactions and new clients pose a huge AML security risk for them.
And since Technology has evolved, criminals have become even more lethal in committing financial crimes like money laundering and terrorist financing.
Reading news about the regulatory fines to financial institutions and reputational damage highlights the importance of AML security for businesses.
That is the reason why anti-money Laundering (AML) security is not just a regulatory obligation it’s a shield that protects businesses from being exploited by criminals, protects reputation, and, helps build trust among your customers.
But let’s be honest, the AML compliance program can create devastation for businesses as well. You must be confused about how. Well, what if your compliance program faces a small oversight in its program, it can lead to hefty fines and reputational damage.
How can your business ensure it’s compliant with the necessary AML regulations while avoiding unnecessary headaches? The answer lies in a well-structured and comprehensive AML security compliance checklist.
This blog discusses the key components that every business should implement to stay ahead of criminals in the fight against money laundering and other financial crimes.
Below, we break down key components every business should implement to stay ahead in the fight against financial crime, and more importantly, stay on the right side of the law.
1. Know Your Customer (KYC)
If you know exactly who you are doing business with, it reduces the chance of money laundering to almost half at the intimal stage, because this customer uses your platform and indulges in financial crimes.
Therefore, companies that have a comprehensive know-your-customer process in place, verify their customer identity and create a risk profile of each client to assess the risk level one can pose.
Customer Identification Program: The first part of AML security risk is to collect the basic information of every client, such as name, date of birth, address, source of income, business address, and so on. Such information makes it quite easy to know your customer and assess the risk level.
Customer Due Diligence: once you know who your customer is, the next stage is to check the risk level based on their jurisdiction location and business relationship. Ask them if they deal in cash-intensive businesses.
Enhanced Due Diligence: if you find any customer suspicious, the enhanced due diligence process must be started against him immediately to check the background history and financial activities of such customers.
2. Transaction Monitoring
Verification of the customer at the initial stage isn’t enough. Because criminals could get involved even if they get past the first stage of verification. So financial institutions must apply continuous monitoring of their customers.
As technology has evolved dramatically, criminals use this technology to commit crimes. To counter these institutions must incorporate automated monitoring systems that can track the patterns and suspicious transactions.
To improve AML monitoring and screening process, the companies do not let any suspicious transaction as undetected. And once the suspicious transaction is flagged, there must be a comprehensive and robust mechanism to handle that surprise case with an advanced AML case management system.
3. Risk Assessment
Not all customer and their transaction poses the same level of threat, the companies must know that. It depends on the customer’s behavior and background history. Therefore, financial institutions must create categories for each customer based on their risk levels. It could be categorized based on their location, customer types such as PEPs or other customers, and their likelihood of involvement in financial crimes.
A strong risk assessment program helps businesses allocate resources where they are needed most, focusing attention on high-risk areas without burdening every aspect of operations with unnecessary scrutiny.
4. Compliance with Global AML Standards
As the world has become a global village, sending and receiving any products across the world is just like making a deal next to the door. As the business wider, the threats wider too. Therefore, businesses need to comply with the Global AML standards to mitigate the chances of money laundering and other financial crimes.
What are these compliances?
Many regulatory bodies set the AML standards for the companies to comply with to avoid regulatory fines and reputational damage.
On top of that are the FATF Guidelines and recommendations, The Financial Action Task Force (FATF) sets global standards for businesses to follow the AML regulations. To enhance AML security, businesses need to ensure the company’s policies comply with FATF recommendations, especially if they operate internationally.
Monitoring and screening every transaction continuously is also necessary for businesses to comply with AML regulations. Regularly screen your customers and transactions against global sanctions lists.
