The past is full of various money laundering scandals. Moreover, these scandals continue to increase day by day. However, unlike in the past, today, there are many areas based on technology to prevent money laundering.
When examining today's financial crime environment, it is necessary to draw attention to the difficulties faced by AML regulatory and financial institutions, and to act together is an apparent reality. It is essential to draw attention to the challenges faced by AML regulatory and financial institutions and to work together. This article includes which AML practices are emphasized by the Bank Secrecy Act (BSA) changes, what path to follow in future AML systems, and the measures businesses should take against money laundering activities.
How to Get a More Effective AML Solution?
Several points are to be addressed to improve and adapt AML systems to the present day. Also, changing regulations and increasing money laundering activities reveal the importance of these precautions.
First of all, AML processing data can be examined in four stages: data integration, knowing your customer, transaction monitoring and research, disclosure.
AML, in general definition, is a wide variety of measures taken to prevent money laundering. Data, including customer profiles and information, is collected and processed in the first stage. Then, the processed data is verified, and it is aimed to create a single view of the customer for KYC, transaction monitoring, and research processes.
An effective AML program's essential points are to have clean, validated, and compatible data with a single source. Having such data speeds up the process by providing more suitable matches for KYC scans. It also enables risk-based assessments to be made with better estimation algorithms. Thus, it allows the time and money spent on an investigation to be significantly reduced.
However, the increasing variety of data sources for AML makes it more difficult for financial institutions to create a single view for their clients. Also, compliance with the current AML regulations and systems becomes very important for institutions. Therefore, businesses should establish an AML policy for their needs and fully implement KYC and CDD. An accurate AML policy includes:
Authentication: Determine the customer identity, and documents must be collected, evaluated, and stored in a digital database. Thus, information can be easily accessed and used in situations requiring any research or investigation.
Check out the watch list: Someone with a politically exposed status may be at higher risk of money laundering than an average person. Therefore, businesses must determine whether their customers have PEP status or are on any current lists. PEP screenings are significant for companies to take necessary measures against any money laundering risk.
Risk Assessment: Businesses need to address all risk factors to identify customers' potential for money laundering and terrorist financing activities. Risk assessments generally allow for more extensive customer information. Customer due diligence or detecting past customer transactions also includes risk assessments.
Financial transactions must be constantly monitored for businesses to detect high-risk or suspicious activities. Transaction Monitoring is a system based on rules. It creates specific warnings within the framework of the rules you set according to your business and customer profiles' needs. For example, all transactions above a certain amount are suspicious and alarms. As soon as the system generates a warning, the transaction monitoring system is automatically stopped and reported to AML / CTF regulators. Approved alerts must be recorded and forwarded as a Suspicious Activity Report (SAR).
Transaction Monitoring is the most critical system to fight money laundering for businesses. Therefore, all companies must know all necessary information about AML Transaction Monitoring Software.
You can read our related content to learn more about transaction monitoring.
A transaction marked as suspicious is investigated in detail by the AML program. At this point, high false-positive alarms may cause problems in time and financial terms. Advanced AML software helps reduce false positives. Thus, research teams can save excessive time and extra workload.
In short, an AML system that is compatible with current AML regulations and has policies and practices created with new technology will move your business forward. However, it is also necessary to have a renewed AML software system to avoid criminal sanctions and financial losses. Therefore, applying AML policies prepared with past information or methods with old technology should be avoided.