While financial crimes pose a threat to the whole world, AML regulations and laws are updated every day. Local and global AML regulators around the world aim to combat financial crimes. Financial service providers play an important role in fighting financial crimes. The deficiencies of financial service providers cause most of the financial crimes. According to the law, companies with financial crime risk have to comply with AML regulations. Therefore, companies have to meet AML requirements by performing controls. What global AML laws must you consider for your company in 2020? What are the AML requirements for your company in 2020?
1. The Financial Action Task Force (FATF)
The Financial Action Task Force (FATF) was founded by the G-7 summit in 1989 as financial crimes pose serious threats. The purpose of FATF is to anti-money laundering and terrorist financing. FATF has 39 members consisting of important regions of the world. Since countries such as United States, United Kingdom, Japan, China, Germany, and the European Commission are FATF members, FATF acts as a global regulator. The task of FATF is to set the standards for AML compliance laws globally.
FATF publishes AML guidelines to countries and firms to combat financial crime. These AML guides describe the AML requirements and the points to be considered. The FATF recommendations aim to prevent the financial systems of countries from financial crime. FATF imposes fines and sanctions on legal entities and liable persons who do not comply with AML / CFT requirements.
The FATF Recommendations:
- Applying a Risk-Based Approach: Firms should identify and evaluate money laundering and terrorist financing risks. In line with these risks, measures should be taken to anti-money laundering and terrorist financing.
- Customer Due Diligence: Financial institutions are required to take customer due diligence (CDD) measures. According to customer due diligence (CDD) requirements, financial institutions must first verify the identity of the customer. At the other stage, the risk level of the customer should be determined by making checks. Companies must establish the audit process according to the customer risk level.
- Record-Keeping: According to AML regulations, financial institutions must keep customer records for at least five years. These records are very important as they constitute evidence.
- Politically Exposed Person Controls: Companies have to make PEP list control to their customers in order to prevent corruption and bribery. Political Exposed Persons are a risk-bearing customer for firms.
- Reporting of Suspicious Transactions: If financial institutions detect a suspicious situation or a suspicious transaction during the checks, they must report this to the competent authorities with a “suspicious transaction report.”
2. The European Union – Fifth Anti-Money Laundering Directives (AMLD5)
The European Union aims to identify and prevent risks that will harm EU financial systems. The European Union publishes regulations and directives to anti-money laundering and terrorist financing. The EU anti-money laundering directives apply to all legal entities operating in the European Union, and the EU Money laundering directives comply with FATC recommendations. The European Union has fought financial crimes with Fourth Anti-Money Laundering Directives until recently. In 2020, the 5th Money Laundering Directives entered into force by updating these Fourth Anti-Money Laundering Directives directives.
According to the EU AML Directives, Customers have to be authenticated before the EU Member States establishing a business relationship with the client. EU wants companies to take a risk-based approach. EU wants companies to take a risk-based approach. Firms can identify crimes such as money laundering and financing of terrorism with a risk-based approach. Companies should determine their customer risk level by checking their customer in PEP lists. Fifth Money Laundering Directives also include the AML obligations of casinos. Also, Virtual currencies and wallet providers are required to ensure AML compliance.
3. The Bank Secrecy Act (BSA)
The Bank Secrecy Act, the United States' anti-financial crime law, is governed by the Financial Crimes Enforcement Network (FinCEN). Financial institutions in the US must comply with this law. Financial institutions have to keep detailed records of client's identities and transactions.
According to BSA regulations, financial institutions have to submit various reports. These reports are:
- Currency Transaction Reports: Currency Transaction Report is prepared and reported to FinCEN for customers who make more than $ 10,000 cash transactions within one business day.
- Suspicious Activity Report: Financial institutions are required to prepare a Suspicious Activity Report if they detect suspicious transactions during AML checks.
- Foreign Bank Account Report (FBAR): US citizens are required to submit a Foreign Bank Account Report (FBAR) to the US Treasury each year for foreign bank accounts or "foreign financial accounts" with a total value of $ 10,000.
The US imposes severe penalties on individuals and institutions that do not meet AML requirements or intentionally neglect them. In America, any person who intentionally violates BSA regulations is sentenced to 250,000 USD or up to 5 years in prison.
Comply with AML Laws with Sanction Scanner
We have explained to you three major AML laws that you have to follow and comply with AML. However, there are many local AML regulations and laws in the world. Although these AML regulations and laws are generally common structures, there are changes from region to region due to their risk structures. Sanction Scanner helps companies comply with global and local AML laws and protects them from various heavy penalties. Sanction Scanner meets your AML controls required from end to end. You can contact us to meet your needs regarding AML compliance.
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