Money Laundering is drastically affecting the economic sector. Between 2004 and 2013, there were $7.8 trillion illegal financial circulations in developing countries, Global Financial Integrity (GFI) reported. Money Laundering causes damages to the rising economies and financial institutions and promotes crime, corruption, and other illegal practices.
The W’s of Money Laundering?
The illicit flow of money to hide its illegal source. Money obtained through illegal means like guns sale, drug sales, human trafficking, corruption is circulating in the financial system to hide its source. This is a type of whitecollar crime that includes government officials, high ranked politicians, and business executives.
Anti Money Laundering
It revolves around the laws, regulations, and rules to combat the illegal financial flows and to prevent the conversion of black money into white. Global Watchdogs like FATF, FinCen, FCA, and FINMA has guidelines for AML and terror financing that are obligatory for every business entity to adopt. A business not complying with Know Your Customer and AML directives can be find or blacklist by law enforcement agencies. According to a report, in 2019 businesses faced a fine of $8.14 billion by regulatory authorities for non-compliance with AML guidelines.
The background screening and continuous monitoring of transactions to kill any effort of illicit cash flow. Every customer on a financial channel is screening against global blacklists, sanction lists, and PEP’s (Politically Exposed Persons) lists issued by international authorities. It not only verifies the customer checks that he is not involving in any illegal activity or is associating with any illegal organization.
AML Compliance Components
The five major components of AML compliance by international regulatory authorities are listing below:
- Polices, Directions and Plans
- Tutoring and education of employees
- Record Keeping
- Customer Due Diligence
A business should make strict internal laws. Policies against money laundering and terror financing. It should report any unusual transactions or illegal activity going through its channels and should train the employees about the latest money laundering tactics.
AML Screening Done?
Done through AML screening software by the KYC solution provider. It is a third party AML/KYC solution that can be integrating into every business like banks, insurance corporations, and financial institutions.
Collecting Personal Data
In this step customer personal information is collecting like name, dob, and address. AML screening software collects this information in real-time.
Real-Time KYC verification
A customer is verified through his identity documents performing any online financial operation. The documents should be authentic and issued by the government like ID card, passport, and driving license. This process eliminates the chances of identity theft and accounts takeover.
Verifying through Blacklists
After KYC, AML screening is performing on customers by checking their name in any of the sanction or blacklists. This process in real-time and ongoing monitoring always undergoes. The blacklists are updating regularly to eliminate any risk of illegal activity.
Organizations keep these results for future ongoing monitoring.
Wrapping it Up
By adopting AML compliance businesses lose the loss to fines and blacklisting. This will develop a pleasant online business environment giving the best customer experience on online platforms. Customers will have more trust in online banking and the negative effects of money laundering on economies can be reduced. This will enhance the revenue of business customers who feel more comfortable choosing a secure online platform.