AML Guidance for Money Transfer Companies

For years, people have been transferring money in different ways. Although many ways have been tried for a transfer, these processes have become electronic with the development of technology. With the development of the telephone, fax, e-mail and the internet, sending money has become much easier and faster. People now use online money transfer transactions rather than traditional money transfer methods. How can you be sure that your transaction is safe when transferring money with one click anywhere in the world?


With such technology development, transaction infrastructures such as money transfer are developing incredibly, but at the same time, criminals are developing the infrastructure of the methods they use to launder money for these transactions. As such, Money Transfer Companies should take more action steps to avoid money laundering and terrorist financing on transactions.


What Does Money Laundering Mean for Money Transfer Companies?


The money sent by the money transfer company should be sent securely over the internet, that is, money laundering and terrorist financing should not occur or this process should not be vulnerable to cyber-attacks. There are some AML regulations by regulators to avoid these, and Money Transfer Companies must comply with regulations set by the respective countries to combat money laundering. Money Transfer Companies may be subject to sanctions by regulators if they fail to comply with these regulations. These sanctions can be fines or disciplinary penalties. In addition, Money Transfer Companies with money laundering and terrorist financing cause serious reputation losses.


You can read the Case Study about the Money Transfer Company.


Why Money Transfer Company Has a Risk of Money Laundering?


Money Transfer Companies use electronic funds transfer (EFT) or Remittance Transactions systems to send money. In the modern world, sending money to international or abroad, making international payments is very fast and this system is developing. Thanks to the internet, data is exchanged instantly and money is sent. On the other side, there is a crucial point that should be considered Money transfer companies are one of the riskiest institutions in money laundering and financing of terrorism. Financial criminals use remittance companies to launder money and support terrorism, so why?


No matter how advanced the internet is, there is always a security problem, which means it can be hacked and money laundering and terrorist financing can take place through the transactions performed by customers. Transaction Laundering (Electronic Money Laundering) is popular these days and therefore, Money Transfer Companies become a potential target for financial criminals.


Hawala Remittance System and Money Laundering


Some alternative remittance systems have been operating for years and most countries are legal and legitimate, Hawala is an example of this. Hawala remittance systems also called alternative remittance systems by Financial Action Task Force (FATF), are unofficial banking regulations that allow the transfer of funds both at home and abroad. Hawale, a cheap, fast and reliable money transfer system, is primarily used by immigrant workers who send money to their families abroad. Alternative referral systems such as Hawale are of great interest by law enforcement and AML regulators because of the risks associated with their abuse, such as money laundering from transactions. Concerns are growing about the potential role of regulators in money laundering through transactions such as Hawale, so they are working more frequently on this issue.


AML Compliance Program of Money Transfer Company


Money Transfer Companies should establish systems for the detection and reporting of suspicious activities, and also ensure the continuity of these systems. Otherwise, they may face heavy fines. There are legal AML compliance programs for criminal liability or company management. Anti-Money Laundering (AML) Compliance program covers every activity of companies at risk of financial crime in combating financial crime and compliance processes. FATF and the European Union announced the measures that organizations should take with various guidelines and reports each semester. Money Transfer Companies must also follow this published guide. Money Transfer Companies should develop and monitor compliance programs, provide personnel training, make recommendations regarding money laundering risks, and assess the risks that may occur in transactions.


Risk Assessment in the Money Transfer Company


This article was mentioned the money laundering and terrorist financing risks of Money Transfer companies. Generally, Money Transfer Companies should conduct a risk assessment to help them identify the nature and extent of AML / CFT resources needed to reduce and manage this risk. Risky transactions should always be properly documented and regularly updated when conducting a risk assessment. The risk assessment made should be commensurate with the nature and complexity of the company, the type of products and services offered, the conditions of the proposed transactions, and the characteristics of the customers.


Money Transfer Companies should also consult various sources of information to identify and manage these risks. The main purpose here is to take into account typologies, guidance, risk indicators, red flags, and recommendations published by FATF. As a result, after the risk assessments made by taking these into consideration, the money laundering rate may decrease or even be prevented completely.


You can click for detailed information about Risk Assessment



Risk-Approach in Money Transfer Company


Money Transfer Companies are expected to identify, use, and understand the ML / TF risks they are exposed to. That's why Money Transfer Companies should carry out risk assessments in order to reduce financial crime in their companies, and the most needed application when performing this risk assessment is the Risk-Based Approach. When evaluating ML / TF risk, Money Transfer Companies should analyze and try to understand how the ML / TF risks they identify affect them and take appropriate measures to reduce and manage these risks. Therefore, risk assessment provides the basis for the risk-based implementation of AML / CFT measures.


When making the Money Transfer Companies Risk-Based Approach, firstly, it performs Customer Due Diligence and determines customer procedures to determine the customer risk level. Some of the most used methods to determine customer risk levels are a PEP and adverse media scanning. After these checks, the risk profile of the customer is determined.


Get to know the Rısk-Based Approach more closely.


Know Your Customer (KYC) Requirements for Money Transfer Company


The process of getting to Know Your Customer (KYC) is done in Money Transfer Companies to verify their customers' identity before or during the opening of an account. KYC procedures are very broad and these procedures are very important globally. The FATF's recommendations also emphasize the necessity of KYC procedures because these procedures are an important step to prevent illegal financial transactions. With KYC, Money Transfer Companies allows them to protect their companies in the face of a possible financial crime in their business dealings or transactions made by their customers. A number of checks to be applied in opening customer accounts in accordance with legal requirements in KYC are as follows; Gathering customer information and checking its accuracy, conducting Customer Due Diligence, and Enhanced Due Diligence if necessary, creating a control program suitable for the customer's risk level.


The requirement of Customer Due Diligence (CDD) in Money Transfer Companies


Customer Due Diligence (CDD) process is used in Money Transfer Companies in ML / TF risk assessment processes. CDD processes should be designed to meet FATF standards and national legal requirements. Money Transfer Companies recognize their customers with CDD and reduce their risks. CDD includes identifying the client's stakeholder and verifying the identity of the client on a risk basis based on reliable and independent information, data, or documentation as required by the applicable legal and regulatory framework. It is very important to apply the CDD process in new business relationships. After checking the person you will establish a business relationship with, you should start the business relationship. Also, CDD checks should be carried out in case of suspicious transactions. You eliminate these potential risks and prevent the money laundering risks that may occur. Enhanced Due Diligence should be done for much more risky customers.


Enhanced Due Diligence


Money Transfer Companies can also be high-risk customers, such as Politically Exposed Persons (PEP), when such people are your customers, you perform Enhanced Due Diligence procedures to scan them. Much more financial crime can be committed through the transactions of high-risk customers, so Money Transfer Companies use Enhanced Due Diligence to prevent such cases, thus avoiding any problems that may arise.


Transaction Monitoring in Money Transfer Companies


Transaction Monitoring, one of the best methods of combating financial crimes, is a very important and necessary application for Money Transfer Companies. Just like CDD, Transaction Monitoring emphasizes the importance of FATF reports and suggestions. Transaction Monitoring is software that helps instantly monitor customer transactions. Thus, Money Transfer Companies can instantly control billions of transactions by automating the transaction tracking process. If there is any risky situation that triggers the rules during customer transactions, transaction monitoring software generates an alarm.


When the software generates an alarm, the process is automatically stopped and the process is reviewed in detail by the Firm's Compliance or Risk Department. After this review, the Suspicious Activity Report (SAR) should be created for the transactions that are at risk by the officers and this report should be submitted to the necessary institutions. With the risk of money laundering, Money Transfer Companies can reduce these risks with this software Transaction Monitoring and protect their companies against money laundering and terrorist financing. It also complies with the AML Compliance Program and is exempt from penalties that may occur.


How Sanction Scanner Helps Money Transfer Companies?


Sanction Scanner provides technology-compatible Money Laundering solutions to strengthen Money Transfer Companies' AML compliance processes. You can control your customers with PEP and Adverse Media data. Sanction Scanner makes your AML queries automatically. Sanction Scanner checks for updated Sanction and PEP lists at fifteen-minute intervals. The Sanctions Scanner's listings comply with all regional sanctions, CTF, and Anti-Money Laundering requirements. Our AML Screening and Monitoring Software, Transaction Screening Software, Transaction Monitoring Software, Adverse Media Screening Software, you can easily adapt to the AML Compliance Program. For more information, you can contact us or request a demo.

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