In the modern era, fraudsters have refined their methods for exploiting financial institutions through heinous crimes such as money laundering. Keeping the sophisticated criminal activities in view, the global regulatory bodies have made AML compliance vital for businesses.
AML compliance is a screening procedure that ensures clients are not involved in financial crimes such as money laundering. The clients are monitored against global PEPs, sanctions, and watchlists. AML monitoring is a part of the know your customer process which is a mandatory thing for many businesses such as stock exchanges, cryptocurrency, fintech, precious metal dealers, banks, and many other firms.
What is Money Laundering?
It is a procedure of moving ill-gotten money to conceal its exact source. The money is obtained through illegal activities. These are terrorism, drug trafficking, and so on, and it is transferred in such a way that authorities are duped. Money laundering is a white-collar crime as usually PEPs and high-rank officials are engaged in it. The purpose of money laundering is basically washing black money in a way that it appears to be white money.
Businesses such as crypto exchanges, banks, gaming platforms, fintech, etc. Criminals use them to launder money, and it is only possible. if these industries do not have an AML screening system or if their systems are not kept up to date with the rising risk of money laundering.
There are several ways through which money could be laundered. Usually, the heinous activity is performed in three steps which include; placement, layering, and integration. Placement means placing the money in banks. Layering is a process of making transactions through sale and purchase. in such a way that the actual source of the money could be manipulated. Lastly, all the ill-gotten money is mixed with white in such a sophisticated manner that it seems a profit gained by selling out assets or a profit from the shell company.
Why is AML Compliance Important?
With the rising number of criminal activities, AML regulations have become a mandatory thing for businesses so that they can secure themselves from heinous crimes. As the AML regulations have become stringent now, it never means that they are a regulatory burden on businesses as it comes with great promises. The main purpose of anti-money laundering compliance in banking and financial firms is to prevent risk.
Fraud is on the Rise
Scams are rising with every passing day. The technological advancement and the advent of online payment systems. it has just increased the risk of money laundering and other financial crimes in many folds. The coronavirus has worsened the scenario. Fraudsters have just taken the advantage of the coronavirus to exploit digital businesses for fulfilling their nefarious activities. This is where AML solutions come as a great option. Having in place advanced AML systems would protect them from such scams otherwise, they would be bombarded with chargebacks and many other claims.
Non-Compliance Causes Fines
Businesses that do not follow AML compliance are subjected to penalties and losses. The fines for not complying with the global AML regulations are quite high that leaving businesses in dismay. Thus, only those sectors are better who have placed AML verification solutions and follow the global regulatory guidelines properly.
Customers are the realm asset of any firm. The more satisfied the clients, the more successful a business is. In the era, where frauds are increasing dramatically, clients are looking for those companies where they themselves and the company are secured from such criminal activities. In case a client does not have a good experience with a company, it means the company has lost its client as well as market value. So, to provide clients with greater experience, businesses need to adopt an efficient AML security system that does not frustrate the client and also provides them greater security services.
AML compliance which has shared the burden of regulatory bodies has also provided businesses a sigh of relief. The screening of clients is no more a tough job since the inception of AML compliance programs. There is a wide range of AML solutions and a business could opt for the one that it finds fulfilling. It just automates the companies and saves their time for those tasks that need greater attention and time. Moreover, it reduces any human errors that occurred with conventional ways of AML verifications. They are indeed a great bet in this modern age.