AML Compliance: Assisting Banks In Overcoming Financial Scams

The recent rise in money laundering activities raises the alarm for the regulatory authorities. While $2 trillion money was launder every year, only 1% of money laundering activities were detect. To counteract this, AML monitoring authorities are conducting worldwide surveys, ensuring proper AML compliance following in financial institutes. This was a staggering situation, and financial institutions were require to gauge the risk and proactively address money laundering.

Money Laundering Is A Crime

Known as a white-collar crime, money laundering was mainly supervising by government officials and Politically Exposed Persons (PEPs). Money launderers conceal their source of earning and hide it with multiple transactions. Banks with incomplete AML compliance cannot detect money laundering activities timely. This gives the criminals an open the door to carry out their criminal activities. They mostly find loopholes in the current financial system and slip through the cracks without being detected.

The Dangers Of Money Laundering – Why AML Compliance Was Require?

Why is money laundering criticized heavily? It’s because the money used in it is “black money.” The criminals try to clean it by adding it to normal financial flow and withdrawing the cleaned cash without coming to the legislature’s notice. The financial assets earning in money laundering were obtaining through the following sources:

  1. Smuggling: Illegal drug selling is very common in the underground world. Criminals earn money by selling illegal and dangerous drugs
  2. Human trafficking: Human trafficking is still happening and mostly goes undetected by the regulatory parties
  3. Weapons selling: The money earning from the illicit selling of weaponry, especially on the dark web, was using in money laundering. Moreover, terrorism funding is a very common reason why most money laundering happens 
  4. Corruption: Many high-rank government officials are involved in money laundering which is why it is harder to detect money laundering activities. Shell companies are the biggest accomplice here

Non-Compliance of Anti Money Laundering 

  1. They lose their reputation: The trust in the organizations and their reputation receive an enormous hit when money laundering cases are discovering in an institute. AML compliance is necessary to be cooperating in banks to protect against reputation damage
  2. Their license can be jeopardiz: The non-compliance with AML compliance and the negligence in the AML verification results in consequences. The regulatory parties can end their license
  3. Huge fines were assign: Financial organizations have to succumb to the pressure of the AML regulatory authorities imposing large fines.  If the financial institutes don’t follow the AML compliance then huge actions are taken against them, most of them resulting in fines

AML Security: Protection Against Money Laundering

Banking institutions were required to make sure that proper AML compliance was following. The non-compliance culture is the main reason why money laundering is increasing rapidly. Turning a blind eye to these criminal activities will only harm the organization. A risk-based approach should has adopting to demote these unlawful attempts. Not obliging the AML compliance severely endangers the stability of the international financial market. As said by Min Zhu, who is the managing director of the IMF,

“Effective anti-money laundering and combating the financing of terrorism regimes are essential to protect the integrity of markets and the global financial framework as they help mitigate the factors that facilitate financial abuse.”

AI-Powered AML Solutions Can Speed Up The AML Screening Process

The insertion of artificial intelligence in the AML systems can enhance the customer onboarding process in financial institutes. Every new customer was screen against global AML sanctionation criminal watchlists and PEPs. Banks should make sure customers opening a bank account weren’t involving in any money laundering activity. Proper risk management has suppose to be done on every customer. Customers should be scanning against money laundering periodically, even those presenting low-risk profiles. It was possible that a person not showing the explicit threat of money laundering. In the beginning, gets involving in money laundering later. In case of any detected money laundering, immediate reports to the regulatory authorities are given.

Concluding Remarks On AML Solutions

AML compliance became a necessity after huge-scale corruption and terrorism funding cases were noticing. The attacks of 11th September 2001 on the World Trade Center opened the eyes of many organizations, declaring how dangerous money laundering can become. This is why FATF and IMF have been in a constant struggle to reduce these attempts. AML compliance provides a safeguard against this calamity.

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