5 things you didn’t know about AML compliance
23 Sep 2022

In the face of changing customer behaviors, and an exponential growth of transactions being made, it's more important than ever having Anti-Money Laundering (AML) regulatory processes in place.
TLDR - Quick summary

The financial industry is witnessing a paradigm shift, where the benefits of working proactively with AML are outweighing the usual gains from only meeting bare minimum compliance standards. Here are some things you probably did not know about AML regulations: 

1. AML Compliance is quickly becoming one of the most critical priorities for financial institutions

Economic crime is reported to have peaked in 2020 at 42 Bn USD. The COVID-19 pandemic, increasing remote working and e-commerce, has added a significant amount of workload onto the transaction- and screening- processes of the industry. In addition, banks nearly hit an all-time high in fines in 2019 for AML policy violations. With these increases, working proactively with AML is not only needed to lower institutions’ financial risk of being fined for not complying with AML regulations, it is also becoming necessary for reputation and simply put: doing good business. 

2. AML Regulators are now targeting a wide range of industries 

The focus of regulatory compliance has widened and is now including even more industries, outside of the financial sector, such as charities and non-governmental organizations. Laws, intended to e.g. prevent financing of terrorist activities, of course need to be reinforced to ensure they are complied with. With international charities and NGOs carrying out aid work in high risk areas, it can be tricky knowing how to best adhere to AML routines while ensuring necessary aid is delivered to people in need.

3. Crypto businesses arguably need AML regulation to prosper

It is no surprise that criminals have incorporated cryptocurrencies in their money laundering techniques, and around 95% of regulators have a team working on crypto regulations. The bottom line is that crypto currencies are here to stay, and just like with any financial structure, crypto is ultimately about trust. This lays the foundation for arguing that crypto businesses not only would benefit from introducing compliance, but even prosper from it. For example, 96% of users complied when global cryptocurrency trading platform Binance launched KYC (Know-Your-Customer) verifications, in turn mitigating the risk of money laundering and contributing to stabilizing crypto. Clear work carried out to combat money laundering increases confidence in crypto currencies as a whole. 

4. It’s critical to choose the right Transaction Monitoring System for AML. 

Transaction Monitoring is key to truly effective AML. In order to identify potential non-compliant gaps, there needs to be a high volume of data processed in only a matter of a few seconds. Although implementing a Transaction Monitoring System may seem just like implementing any other system, various factors need to be considered beforehand such as using tools that are: 

  • Adapted to business size and complexity
  •  Eases collaboration and documentation
  • Helps adjusting scenarios for improving workflows continually

 

deploying compatible hardware, setting up scenarios thresholds, and the current technology architecture. Something that might be overlooked by businesses looking to automate and digitizing their processes with a third party.  

5. Sanctions are becoming more complex  

Lastly, the very nature of sanctions is becoming increasingly more complex. The global landscape for sanctions is proving to present plenty of challenges for businesses and organizations. Sanctions, which previously used to only concern specific legal or natural persons, now also include specific sectors (sectoral sanctions) and activities (narrative sanctions). Institutions must find a balance between carrying out effective AML checks and running an efficient business.

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