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AML Compliance – Sectors Liable For Building Effective Programmes

Financial institutions are facing a rise in the cases of terrorist financing, money laundering and other such threats. Criminals are implementing ever-evolving advanced technologies to hide their sources of funds, UBOs, and identities. Financial institutions lacking efficient AML solutions are more prone to these criminal threats. Therefore, financial institutions should incorporate robust Anti-Money Laundering (AML) services to identify criminals. 

AI-powered solutions provide accurate screening and risk assessment of customers prior to their onboarding. Regulatory authorities like FATF, AUSTRAC, and FinCEN also mandate financial institutions to verify customers’ identities and the risks they possess. Here, the digital solution streamlines the process while ensuring accuracy. The blog covers components of the AML program along with the industries liable for compliance. 

AML Solutions – Three Stages to Compliance 

Regulatory authorities are revamping strict regulations, therefore, previous strategies financial institutions are using are no longer enough for AML compliance. Therefore, industries and other financial institutions like banks need to bring improvements in their strategies. 

This will help them counter unforeseen criminal threats while staying compliant with the set standards. To build an effective AML program, financial institutions and other industries need to ensure that they follow the following stages: 

Customer Identity Verification 

This stage involves the customers’ identity verification. For this, financial institutions as the customers to provide information like full names, addresses, and date of birth. In the UK, financial institutions ask for this information to ensure the customer is on the electoral list and is not a mere imposter. Furthermore, institutions with robust AML solutions in place can perform these checks in minimal time. They can access global databases and verify customers’ identities in real-time. 

Customer Due Diligence and Risk Assessment 

As per the regulations authorities enforce, the financial sector and other firms should perform due diligence on customers prior to onboarding. This refers to the risk assessment of customers by using their identity information. The firms then cross-verify this information against Politically Exposed Persons (PEPs) and other global sanction lists. This helps financial institutions onboard legitimate customers who do not possess the risk of money laundering. 

Therefore, financial institutions and other sectors like the capital market should perform accurate due diligence on customers. The AI-powered AML security solutions help these institutions to carry out accurate risk-assessment in real-time. 

Ongoing Monitoring of Customers 

As the AML directives mandate, financial institutions can not rely on identity verification and due diligence alone. Criminals are using advanced methods to bypass these checks and perform illicit activities after illegitimate onboarding on the platform. 

Therefore, financial institutions should perform ongoing monitoring of the customers. This involves transaction monitoring, identification of UBOs, regular checks, and changes in identity information. Financial institutions can keep track of their customers by incorporating accurate AML monitoring solutions. 

Sectors Obliged by the Authorities to Perform AML Verification

Building an effective AML program is not confined to the banking sector only, other firms involving money-related actions should also build it. Criminals also use insurance firms as their medium to convert their ill-gotten funds into white money. Regulatory authorities that mandate banks to perform AML checks also oblige these sectors to ensure legitimate customer onboarding:

Banking Sector

According to various regulations like 6AMLD, POCA, and SAMLA, banks should perform Anti-Money Laundering (AML) verification. This is to counter the chances of financial crimes. Since banks started providing digital banking, they are experiencing an increase in money laundering. Criminals use digital methods and camouflage identities to escape the identification checks. Ultimately, they use the legitimate banks’ operations to convert their black money. 

Therefore, banks should employ accurate solutions to restrict criminals from registering and carrying out their malicious activities. A combination of AI for identity verification and ML for automating document validation will help banks to enhance their customer digital onboarding process. 

Insurance Firms

The trend of using just banks for money laundering is outdated as criminals are also moving towards insurance firms. They apply for insurance, buy it, and submit claims so that they can retrieve the money. Criminals also use life insurance policies for investment purposes, through continuous deposits and withdrawals they make the laundering look like legitimate transfers. Therefore, insurance firms should also incorporate authentic checks to identify these criminals and mitigate the chances of financial crimes. Anti-money laundering (AML) is the broad category of the laws, rules, and procedures aimed at deterring money laundering,

In the End

The increase in financial crimes in various sectors is forcing regulatory authorities to enforce strict rules and penalties for non-compliance. This is why financial institutions and other sectors involving money transfers need to employ robust AML solutions. Otherwise, financial institutions will be facing non-compliance hefty penalties and an increase in the chances of money laundering. Therefore, an effective Anti-Money Laundering (AML) program in place will not only uplift the institutions’ reputation but also ensure compliance with regulatory standards.

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