Neutralizing Money Laundering using AML System Controls
What measures should be in place to tackle the activities of money laundering?
Violations of Anti-money laundering policies need timely and effective procedures to curb the effects of money laundering in the financial sector. To ensure the stability and smooth functionality of financial institutions, system controls gives more credibility and reinforcements to deny any form of corruption within the sector from flourishing.
- Know Your Customer (KYC) Policies:
As part of procedural standards in the financial sector to ensure verified customer due diligence (CDD), a background check on customers’ identities and the risks associated with their profiles are essential to investigate, measure & take appropriate actions with references based on reputable records pertaining to customers’ biopsychosocial details, fraud, corruption and other records on financial crime status before onboarding and granting access to customers.
To achieve all these, Know Your Customer (KYC) procedures should be a non-negotiable part of financial institutions’ process for new and existing customers from onboarding phase and through all ongoing monitoring cycle. This helps to keep the fraudulent activities such as money laundering at a very bare minimum.
2. Illegalization of Money Laundering Activities:
It is very important to state the obviously wrong things. Psychologically, human nature can lure many to partake in the act of money laundering either as a choice or out of stress. But regardless, we need to define what’s best for a better result in the society.
Hence, the need to ensure a Law criminalizing the act of money laundering, established by respective governments, businesses, agencies and apex institutions or international bodies are laid out with punitive actions to discourage any attempt/activities inciting to break anti-money laundering laws and laws that support AML with effects as stipulated accordingly.
Read More about Ongoing Monitoring.
3. Holding Periods:
Huge sum of deposits especially when above the threshold amount expected of particular Users are withheld for some number of hours to manage risk of exploitation by suspected money launderers to “cleanse” illicitly gotten funds through financial institutions.
4. Adequate Record-Keeping & continuous Ongoing Monitoring:
Records serve as historic reference to understand past trends and for the evaluation of current patterns of individual clients’ profiles. With this, tracking and early detection of suspicious patterns relating to red flags indicating money laundering activities can be easily detected.
5. Integration of Technological Software to Ensure AML Compliance Standards:
Identity verification softwares such as Identitypass which are augmented with Artificial intelligence (AI) features that can be integrated into the onboarding and ongoing monitoring process of businesses to serve as reference and links to trusted public and independent databases for identity authentication and helps in rating risks related to individual profiles before and after onboarding. This can also help alert authorities in-charge about rise in suspicious activities related to fraud.
6. Employing a Competent Anti Money Laundering (AML) Compliance Officer:
Primarily, an AML Compliance Officer is in charge of overseeing the AML policies, and standards are followed to the details as stipulated in global Financial Action Task Force (FATF) standards, and important laws like the Patriot Act and Bank Secrecy Act (BSA).
The AML Compliance Officer is also responsible for tracking and keeping records of high-risk profiles as well as reporting cases of suspicious fraudulent activities to necessary authorities.
Conclusion
The reality when it comes to ensuring safety and sustainability in the financial sector counts on system controls measures. All these as discussed are primary needs to consider when putting together a strong and accountable anti-money laundering system together. Although, more research can bring about more intuitive measures and initiatives to tackling fraud and other financial crimes. As trends tend to evolve overtime, so is the need to stay informed and alert as AML structures and system controls tend to be flexible based on best practices aimed to tackle current threats and situations. Follow me for more updates such as this.
