Anti-Money Laundering Guidance for Leasing

Blog / Anti-Money Laundering Guidance for Leasing

Leasing companies are non-bank institutions that provide resources to the financial system like factoring and financing companies do. Since leasing is within the scope of financial services, it is subject to AML provisions. In addition to financial leasing companies, participation banks, development, and investment banks can also perform the leasing method. The financial leasing method is subject to specific regulations.

The increase in digital transactions, especially after COVID-19, showed its effect in this sector as well, and the market share of the leasing method has grown thanks to this considerably. As the number of customers increased, the workload of leasing companies also increased. Performing customer scans manually in customer engagement processes is a time-consuming and high-risk process. In other words, there are some risks that come with this growth. In order to mitigate and control these risks, leasing management, compliance control specialists must act in accordance with the statutory standards of AML  regulators and states.

What is Leasing System?

In accordance with the procedures in the leasing (financial leasing) sector, all companies that can take legal action according to the contract can benefit. These can be all-person, joint-stock, and limited companies, as well as in professions with offices, such as self-employed accountants, lawyers, and architects. Leasing is a very preferred method in the new period because you can rent the vehicles that you have to deal with at high prices and have to deal with when they expire and return them to the leasing company when you are finished or when the vehicles are out of service. Compared to the purchasing cost, it is preferable for companies. Leasing is a contract that provides the rental of immovable properties. While the ownership right of the investment property you rent is in the leasing company, the right of use is given to you for a certain period of time. According to the contract, the right of ownership may also pass to the lessee at the end of the lease agreement. Another advantage of leasing is that it provides long-term capital investment in foreign resources, allowing you not to adapt your short-term resources to long-term fixed capital investments. 

With the leasing method, you can rent all kinds of new or second-hand machinery, equipment, investment goods such as real estate, which has increased recently, in return for a determined rent, provided that the ownership right remains with the leasing company throughout the contract period. It is also possible to rent technological tools and vehicles for less than one year.

How the Leasing System Works

When the lessee decides to invest, he contacts the businesses that provide financial leasing services. First, alternative payment plans suitable for the tenant's investment and income are prepared, and the process of preparing documents begins. After the delivery of the documents, the contract is concluded together with the leasing loan process. The financial leasing company purchases the domestic or imported goods within the framework of the agreement and gives the right of use to the lessee, keeping the ownership right as we mentioned above. Upon the expiry of the lease term, the property right is transferred to the lessee. Compliance with the law is important in this process. When the lease agreement expires, the leased property or vehicle is sold to the lessee, who has the right to use it for a very low symbolic price. The lessee is responsible for the insurance and maintenance of the leased property during the rental period.

AML and Leasing

The leasing contract, the provision of loans, and the continuity of the transactions have received a great demand for digitalization. The manual way that companies that carry out these transactions will follow to get to know their customers while making contracts through digital channels and obtaining credit not only increases their workload but also makes them vulnerable to the penalties to be imposed by the regulators within the scope of leasing regulations, and can create a bad impression and damage their reputation in preventing money laundering and terrorist financing. Sanction Scanner solutions help companies in the leasing sector, as well as all other financial sectors, in order to reduce false positives and workloads and establish reliable and fast collaborations.

Know Your Customer(KYC) Requirements for Leasing

The customer identification process is done during or before opening an account to verify the customers' identity in the financial leasing industry. FATF's recommendations particularly emphasize the need for a Know-Your-Customer rule globally. It is a very important step to prevent illegal financial transactions. This process enables the company to protect itself against the financial crime committed by the customer. Before opening the customer's account and giving a leasing loan, collecting the necessary information and documents from the customer and checking their accuracy, performing customer due diligence, and performing advanced due diligence are the processes of KYC.

Strengthen the AML Compliance policy

Like every financial sector, the leasing sector also depends on the FATF recommendations, the regulations, and the supervision of the regulators in the country where they are located. It is among the organizations that need to ensure AML compliance within the borders of Turkey. These organizations are regulated and supervised by MASAK. Leasing, which is under the financial services sector, has to strengthen its AML compliance processes. Sanction Scanner strengthens the AML compliance processes thanks to the compliance software it offers, supported by artificial intelligence. With the AML Name Screening solution, you can check existing leads on banned PEP lists, wanted lists, and adverse media data. Thanks to Ongoing monitoring, they can monitor the risk status of the customers they have listed on a daily, weekly, or monthly basis. Sanction Scanner performs AML queries automatically.

The Sanction Scanner's listings comply with all regional sanctions, CTF, and Anti-Money Laundering requirements. With our AML Screening and Monitoring SoftwareTransaction Screening SoftwareTransaction Monitoring SoftwareAdverse Media Screening Software,

You can easily comply with the AML Compliance Program. For more information, you can contact us or request a demo.



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