Anti-Money Laundering (AML) includes policies, laws, and regulations to prevent financial crimes. AML is a worldwide term to prevent money laundering. Global and local regulators are established worldwide to prevent financial crimes, and these regulators create AML policies. Companies have to comply with these AML regulations, but compliance can be a complex process for companies. For this, companies have AML compliance departments that ensure AML compliance.
To understand AML regulations, it is first necessary to learn what money laundering is. Money laundering, a major financial crime, is the legalization of money obtained illegally. Money laundering is also a method to hide the nature, source, and act of a crime or give a legal image. There are various money laundering methods, and these methods increase and develop with the development of technology. According to the International Monetary Fund (IMF), the money laundering rate is between %2-5 of the world's GDP. This ratio corresponds to a tremendous amount of the world's total money. To minimize the negative effects and damages of money laundering and ensure that criminals can be identified, global and local regulators announce new directives to prevent money laundering. These regulations are called Anti-Money Laundering (AML).
Anti-money laundering initiatives became famous when a group of countries around the world formed the Financial Action Task Force (FATF) in Paris in July 1989. The Financial Action Task Force (FATF) initially studied and developed anti-money laundering measures, established international standards for preventing money laundering, and promoted their implementation. In October 2001, however, in the wake of the September 11 terrorist attacks, the FATF expanded its mission to include the fight against terrorist financing. Another important institution in the fight against money laundering is the International Monetary Fund (IMF). Like the FATF, the IMF regulates and compels 189 member states to comply with international standards to prevent terrorist financing.
The European Union also complied with the first Anti-money laundering Directive in 1990 to prevent the financial system's misuse of money laundering. The European Union AML Directives are constantly being revised to reduce the risks associated with money laundering and terrorist financing.
The primary purpose of AML regulations is to prevent money laundering. Regulators publish a series of procedures to achieve this goal. Companies have to follow these procedures. One of these procedures is the "Know Your Customer." Regulators require companies to learn more about their customers. According to customers' information, companies can understand whether there is a suspicious transaction. For example, a customer who wants to transfer money can be on a country's list of terrorists. If the firm does not know this customer, it will probably help to finance terrorism. Therefore, it will be a substantial financial crime, and also, this leads to hefty penalties. But if the company uses AML software such as Sanction Scanner, it will block suspicious transactions. After that, the company will report this transaction and announce that it has prevented a major financial crime. According to another procedure, regulators require the institutions to report transactions of more than $ 10,000.
Apart from KYC measures, organizations can apply Customer Due Diligence procedures to understand their customers' risks and know their customers. CDD procedures can identify customers' risks and take necessary measures, but some customers are high-risk, such as political-exposed people (PEP). CDD measures may not be sufficient to identify these people's risks, and Enhanced Due Diligence procedures may be applied for this. Enhanced Due Diligence is a KYC due diligence process that provides a higher level of investigation.
While knowing customers and knowing their risks is vital to AML compliance programs, it is just as important to review customers' transactions. By constantly monitoring the transactions of their customers, organizations can instantly detect suspicious transactions and create alerts. AML Transaction Monitoring software enables this process to be easily provided in financial institutions. AML Transaction Monitoring also makes a rule system for monitoring transactions. If an event triggers these rules during customer transactions, the transaction monitoring software generates an alarm. When a warning starts, the process is automatically stopped and examined in detail by the companies' Compliance or Risk Department. Notifies suspicious transactions to AML, CFT, and KYC regulators if they detect a customer transaction crime. This report is called the Suspect Activity Report (SAR).
Criminals use money laundering to conceal their crimes and their money. Financial institutions play a critical role in the world of financial crime. If financial institutions do not comply with the AML regulations, financial crimes will continue to increase. 2-5% of GDP is money laundered through the financial system. That's a huge amount. Besides, regulators impose various penalties for companies that do not comply with the regulations. The value of AML fines in 2018 was $ 4.27 billion. In 2018, the value of AML penalties was $ 4.27 billion. At the end of 2019, the penalties increased by approximately two times compared to 2018 and reached about $ 8 billion. Besides, AML penalties in 2020 are higher than in 2019. Most of the institutions receiving these penalties are banks. Take a closer look at AML Fines in 2020.
It can sometimes be complicated for companies to comply with AML regulations. Regulations are updated continuously. With increased audits and penalties, companies must give more importance to compliance with these regulations. Compliance processes of companies are provided by the AML compliance officer of the firm. The compliance officer follows regulations and regulates their companies' activities that violate these regulations. Another purpose of the compliance officer is to protect his company from financial crimes. But it is not possible to do this manually. There are thousands of sanctions and watchlists of more than two hundred countries published in the world. As you can guess, companies don't want people on these lists to be their customers. Therefore, compliance officers should check whether their customers are on these lists. Sanction Screening Service such as Sanction Scanner allows the compliance officer to check their customers in these lists quickly.
With the development of technology, the types of financial crime are changing. Firms need technology to help prevent financial crimes. AML compliance software such as Sanction Scanner was developed to protect companies from financial crimes. Compliance software has simplified complex compliance processes for companies.
Sanction Scanner's database consists of over 3000 Sanctions, regulatory and law enforcement, and other official global and local sanction and pep lists, including those issued by the USA, UK, UN, and other global majors minor government departments. You can use integration between your Project and Sanction Scanner. This will automatically make your own AML queries. We always keep our lists up to date. Sanction Scanner checks and processes updated Sanction and PEP lists every fifteen minutes. Sanction Scanner's lists are compatible with all regional sanctions, CTF, and Anti-Money Laundering requirements. You will be using real-time data always. AML Check is straightforward with Sanction Scanner. If you need more information about Sanction Scanner solutions, you can contact us or request a demo.