To avoid money laundering, tax evasion, and terrorist funding, financial institutions must comply with the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations. To do this, organisations must implement an AML program that includes the procedures this article will describe today.
Why Must You Update Your AML Program?
The sophistication and amount of financial crimes, notably money laundering schemes, are increasing. The human and environmental toll incurred from these crimes is extensive and immeasurable. Terrorism, drug and human trafficking, and the illegal wildlife trade damage lives and communities. Money laundering accounts for 2-5% of the world’s gross domestic product, a high economic cost. At the same time, firms that provide financial services confront increasing risk. In 2019, regulators imposed more than $8 billion in fines, nearly double the amount levied in 2018, and the trend continues.
As the threat landscape continues to evolve, it is more crucial than ever for financial institutions to adapt their defensive posture to the increasingly risky environment. In reality, now is the moment for financial institutions to focus on updating their anti-money laundering (AML) systems to strengthen their position now and in the future. It is the ideal moment for Chief Compliance Officers (CCOs) to embark on the path to the modernisation of their AML program to increase program effectiveness and efficiency.
What Must a Corporation Do to Be AML Compliant?
A robust reporting system expedites the delivery of information regarding money laundering to the appropriate authorities.
Awareness of High-risk Consumers
Businesses must assess their clients’ risk profiles and process them accordingly using improved due diligence, customer due diligence, etc.
A Compliance Officer Inside the Group
The procedure of AML compliance is challenging to handle and requires a qualified person who has the expertise and skills to ensure strict compliance with ever-changing rules and regulations.
Compliance must be the moral obligation of every team member throughout all organisational hierarchies. Staff members must be taught how to create and report suspicions.
Required Actions to Maintain AML Compliance
The purpose of an anti-money laundering compliance program is to uncover fraud, money laundering, tax evasion, and terrorist funding within a company. The following actions are necessary for a compliance program to achieve this objective:
- Exhaustive reporting: A complete reporting system is essential because it enables authorities to instantly obtain information regarding money laundering. It will save time during the investigation as they can refine their search and interrogation strategy.
- Detection of problematic profiles: To discover risky profiles and take remedial action while there is still time, a company must examine its clients’ profiles and process them appropriately. Discreetly listing suspicious persons, their abettors, and their activities will help you take immediate action in the event of a money-laundering scam.
- Requirement of a compliance officer: This process’ efficient and effective administration requires a compliance officer, a person of suitable expertise and stature familiar with the operational boundaries of company compliance and application demands. This person should be principled and unbiased.
- Execution at all levels: Compliance is a moral obligation that all team members must efficiently manage at all organisational levels. Employees must be capable of identifying and reporting questionable behaviour. The confidentiality of their disclosures must be maintained.
You should tailor your AML program to your business. It should be compatible with all rules, but you should not overcomplicate it by attempting to comply with regulations you are not required to follow.
You must also identify the optimal balance between risk mitigation, client satisfaction, and income. You might lose many prospective clients if your onboarding procedure is overly cumbersome.