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AML Compliance – Financial Crime & the Regulatory Landscape

AML Compliance

Financial crime is on the rise with more and more businesses engaging in the corporate industry. To better understand the compliance practices businesses follow. It is important to first know about what is Anti Money Laundering. How it acts as the first line of defense against financial crime. Money laundering carrying out by criminals to clean ill-gaining money through illicit sources is one big concern for enterprises these days. The money that supposedly looks legal is send over multiple channels to hide its original source. 

AML compliance is a set of policies set up by global watchdogs. That the financial industry stays regulated. Corporate entities performing businesses with clients (partner firms or customers) are directing to carry to AML checks to make sure no fraudsters. Use their platform to perform nefarious activities contributing to financial crime. 

Regulators That Enforce AML Compliance

Bank Secrecy Act of 1970 was the one-of-its-kind AML regulation introducing by the United States in the fight against money laundering. Related crimes such as terrorist financing and illegal trafficking of humans and hard cash. This AML compliance law allowed businesses to devise frameworks through which they can identify possible criminal behavior and prevent money laundering instances. The BSA also lists reporting requirements for banks operating across the States and how they onboard new customers. 

The Financial Crimes Enforcement Network (FinCEN) – the federal financial intelligence unit in the US – is the official regulatory. A body that ensures participating entities follow the BSA and other AML compliance laws such as the US Patriot Act to curb money laundering.  

What’s the Role of FATF?

The Financial Action Task Force establishing in 1989 set forth to address various money laundering concerns around the globe. The organization was establishing to address shortcomings in the legal financial systems as well as to speed up efforts in preventing organized monetary crime. After the 9/11 attacks on the World Trade Center in the US, the FATF include AML compliance regulations. To deter terrorist funding and CFT (Countering the Financing of Terrorism) obligations were deeming necessary for business entities. 

Apart from that, the International Monetary Fund (IMF) consisting of 190 member states aims at standardizing the global financial system and keeping an eye on related sectors in light of AML compliance regulations. Considering the need to combat financial crime and the need for AML solutions, let’s have a look at current-day Anti Money Laundering.

Significance of AML Compliance Today

As per findings of the United Nations Office on Drugs and Crime (UNODC) the amount of money laundered each year is nearly 5% of the combined global GDP that makes a staggering 2 trillion USD in total. Money laundering is not just limited to acquiring the dirty money and cleaning it for financial profit, but it is further used in other heinous crimes such as buying arms, funding terrorist organizations, carrying out an organized crime against particular countries, and selling cross-border narcotics, etc. 

This is one big concern not only for the corporate space but for regulatory authorities. That are eager to ensure transparency for a safer financial landscape. This is when AML compliance laws come in handy in preventing such instances and keeping criminals at bay. The fact that AML regulations are built on counterterrorism practices makes them a good fit for today’s crime-dominant financial world

Advantages of AML Compliance

AML providers in the market now offer regulatory technology which enterprises can use to enforce in-house AML compliance. As well as prevent bad actors from associating ties with their platforms. Apart from customer protection and compliance obligations. Here are some other benefits of developing an AML compliance program within your business organization:

  • Abiding by regulations set forth by financial watchdogs allows businesses to create a better. Brand image in the market that ultimately increases the stakeholder value
  • Performing AML verification of clients helps businesses avoid non-compliance penalties that can result due to not conforming with regulatory obligations. 
  • If an AML compliance program is in place, it guarantees that all regulatory obligations are met. It reduces the loss of revenue for a particular organization and the risk of exposure

Summing It Up

  • Financial crime is on the rise with the corporate landscape evolving 
  • Regulatory watchdogs like the FinCEN and FATF have set forth guidelines and obligations to prevent. The illicit flow of money through the legal financial system
  • AML verification of business client helps corporations to stay compliant with international standards to prevent money laundering instances
  • AML compliance allows businesses to combat monetary crime better and to come up with a strategic framework for its implementation

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