What is Anti-Money Laundering?
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Anti-Money Laundering (AML) involves policies, laws, and regulations to prevent financial crimes. AML is a global term to prevent money laundering. There are international and local regulators established in the world to prevent financial crimes. Each country has its different AML policies. Companies follow these AML regulations. Complying these regulations could be a complicated process for companies. For this, companies have AML compliance departments to ensure AML compliance.
What Is Money Laundering?
To understand AML regulations, we need to learn what money laundering is. The most important thing about money laundering is a major financial crime. Money laundering is the legalization of money received illegally. There are many money laundering processes. Money laundering methods are increasing with the advancement of technology. The money laundering rate is among 2–5 percent of world GDP. This ratio corresponds to a considerable amount of the world’s total money. Regulators announce new directives to prevent money laundering. These commonly refer to as AML regulations.
What Is The Anti-Money Laundering Process?
The principal purpose of AML regulations is to prevent money laundering. Regulators distribute a series of AML procedures to achieve this goal. Companies have to follow those procedures. One of those procedures is “Know Your Customer” Policy. Regulators require businesses to learn more about their customers. According to customers’ information, companies can understand suspicious transactions. For example, a customer who wants to transfer money could be on a country’s list of terrorists. If the firm doesn’t know their customer, it will probably help to finance terrorism. It will be a substantial financial crime, and also this leads to hefty penalties. But if the company uses an AML software such as Sanction Scanner, it will block the suspicious transactions. After that, the company will report this transaction and announce that it has prevented a major financial crime. According to another procedure, regulators require businesses to report transactions of more than $ 10,000.
Why Is AML Compliance Important?
Criminals use money laundering to hide their crimes and their money. Financial institutions play a significant role in the world of financial crime. If financial institutions don’t comply with the regulations, financial crimes will continue to increase. 2–5% of GDP is money laundered through the financial system. That’s a considerable amount. Also, regulators impose various penalties for companies that do not comply with the regulations. The amount of AML fines in 2018 was $ 4.27 billion. At the end of 2019, an increase of 2–3 times the penalties is expected compared to 2018. Generally, the institutions receiving these penalties are banks.
How Do Companies Ensure AML Compliance?
It cannot be effortless for companies to comply with AML regulations. AML regulations are updated continuously. With expanded audits and penalties, companies must give more importance to compliance with these regulations. Compliance processes of companies provided by the AML compliance officer of the firm. The AML compliance director follows AML regulations.
Another goal of the compliance director is to protect his company from financial crimes. But it is not possible to do this by manual. There are thousands of sanctions and watchlists of more than two hundred countries distributed in the world. As you can imagine, companies don’t want people on these lists to be their customers. Compliance directors should check whether their customers are on these lists. Sanction Screening Services such as Sanction Scanner allows the compliance officer to check their customers in these lists quickly.
