Why Is AML Compliance Vital In The Modern Business World?
AML (Anti-money laundering) compliance is nowadays vital for many commercial entities. Businesses in various industries need to be AML compliant and have a screening AML process in place to verify different operations that are carried out by their clients. This is especially the case when money is involved, like with banks or lenders.
In order to properly understand AML compliance, we have to talk about money laundering and some other facts.
Defining Money Laundering
Money laundering can be defined as a process through which money is illegally moved with the purpose of hiding the original source. We thus have black money obtained through some illicit activities, like terrorism, human trafficking, or selling drugs. The money is transferred with the use of a pattern so that the money trail is hidden from the authorities.
The police categorize money laundering as a whitecollar crime. This is because it often involves politically exposed people (PEP) and high-rank officials. Fintech companies, gaming platforms, stock exchanges, real estate companies, financial institutions, and banks are nowadays used to actively launder money. AML screening and money laundering laws appeared to stop this practice.
Defining AML Compliance
AML compliance can be defined as a process through which customers are monitored and screened in order to eliminate and identify money laundering efforts. Customers are screened against PEP lists, sanctions, and global watchlists. This is a part of the KYC verification process and is now mandatory for various industries like fintech, banks, real estate, stock exchanges, precious metal dealers, gaming platforms, and cryptocurrency.
Anti-Money Laundering Regulations
AML regulations are practically the rules for institutions, countries, and businesses. They were created in an attempt to eliminate terrorist financing activities and money laundering. When they first appeared, the AML laws appeared just to be applied to the financial institutions in an attempt to control potential drug trafficking. The goal was to control the money of the drug cartels by identifying black money movement. Eventually, crime turned out to evolve so very stringent AML laws ended up being implemented.
Right now, CFT (counter financing of terrorism) and AML are global concerns. There are different international authorities, like the world bank and the FATF, that work with various national authorities, like the FCA, FINCEN, and FINTRAC, or state banks in order to control the level of money laundering happening.
Unfortunately, we cannot talk about a single AML act. This is because every single country has some unique laws. However, most of them follow the official recommendations of the FATF. The FATF (Financial Action Task Force) is a very important global authority that offers recommendations to all countries in regard to efforts needed to control terrorist financing and money laundering.
To sum up, AML compliance is mandatory these days because of the fact that it helps governments to protect their countries and businesses against money laundering activities. As time passes, laws will become more and more complex. This is because criminals become smarter and smarter. You need to be sure that you meet recommendations and that you respect all laws.