Anti-money laundering (AML) providers use cutting-edge screening and monitoring software to help financial institutions fight the battle against financial crimes, especially money laundering.
Global AML regulations are becoming strict by passing years. The reason is they want to clean businesses from black money and the governments have got their back in this initiative. All the governments have agreed to crush terror funding and related crimes. They have urged the businesses operating in their borders to comply with the AML compliance program and penalize them for non-corporation. Not only government institutions but global law enforcement agencies also fine and sanction businesses and individuals for not having an effective AML program.
What Does an AML Provider Do?
In simple words, an AML provider assists businesses to implement the required anti-money laundering compliance program in their procedures. An AML compliance program differs among businesses. For instance, banks deal more with funds transfer, deposit, and withdrawal while forex deals with funds transfer. A business nature and geographic location have a great impact on its AML compliance program.
How AML Provider Works?
Let’s have a look at how an AML provider works:
States and global watchdogs have maintained databases of individuals that possess a high risk for money laundering and financial crimes. Politically Exposed Persons (PEPs) list of FATF or Specially Designated list of the United States. The names are added based on criminal history or association with any high-risk individual. If any business is committed any financial crime or does not have an AML program, also added to these lists. Businesses are prohibited to do trade with the individual or businesses with the entities in sanction lists. The records in these databases are updated regularly.
Whenever a new customer is registered in the business, his name is screened through blacklists by AML screening software. There is no room for manual checking these days because hundreds of customers are onboard in a single day. But robust screening by AML providers gives the results of screening in seconds. Also, the risk level of the customer is marked by the AML provider by setting flags on him. The flags are inserted by analyzing his previous history, origin country, and nature of the crime. Additionally, name screening is also done to identify high-risk entities receiving unfavorable folks’ attention.
FinCEN requires businesses running in the US to submit Suspicious Activity Reports (SAR). The report is developed by monitoring customer transactions by AML software. It identifies specific patterns of the transactions and consolidates them with the analytics of customer behaviors and historical information. Every request of customers is monitored in this step like cash deposit, withdrawal, transfer, or load claim. The 4th AMLD of the European Union has focused on transaction monitoring for SAR.
Transaction monitoring works on the following protocols:
- By classifying unusual actions at the business and customer level
- By improving automation of reporting process
- By making an environment of confidence among regulators and businesses
Currency Transaction Reporting
Some businesses and regulators have set a limit of flagging on transactions. For example, transactions exceeding $10,000 will be marked as a risk-flag under Bank Secrecy Act. These transactions further undergo the process of enhanced due diligence. In EDD the customers are verified and screened at a high level.
In some cases, the amount of transactions is small but aggregates a large amount at the end. These transactions are also noted for additional verification.
Anti-money laundering compliance is a comprehensive process of implementing AML rules and laws. It includes all the above steps to be done in real-time. In this fast processing world, only extended software can meet the requirements of the AML compliance program. An updated AML compliance program also includes training employees, conducting regular audits, and having an AML compliance officer.
Summing it Up
All the businesses are at risk of money laundering in this time where criminals search loopholes in the system. AML providers software simplifies this process by doing all the verification and monitoring procedures in real-time without any manual help. Businesses should adopt AML software for the successful implementation of compliance programs.