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Saturday, September 30, 2023

AML Compliance – Helps Countries to Combat Money Laundering

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Money laundering is a growing concern these days as everyone wants to become rich. Some people earn money by working day and night to become rich. While some people adopt shortcuts to earn more and use illegal means such as fraud or corruption. So, they become involved in money laundering and become money launderers. The process in which money launderers make black money through illegal activities such as corruption is called money laundering. Money launderers make their money legal by investing in cryptocurrency markets. 

 

Money laundering is the main reason behind the socio-economic disasters of many countries around the globe. Money launderers have now started targeting Fortnite, an online game, also for their abhorrent purposes. It also affects businesses in various ways. According to a source, 2-5% of global GDP, or $2 trillion US dollars are laundered every year by money launderers. So, we need a proper mechanism to stop money laundering. Anti money laundering compliance is the only solution to stop money laundering.

What is Anti-money Laundering?

The laws, policies, rules, and regulations made by financial regulatory authorities to prevent money laundering are called anti-money laundering. AML aims to prevent money launderers from hiding their money and making it legitimate. All financial institutions should follow national and international AML standards to comply with AML regulations. Different countries have different financial regulatory bodies such as the UK has The Financial Conduct Authority and European Union has EU 5 AMLD and 6 AMLD etc. For AML compliance, businesses need to comply with all AML regulations including FATF and their respective country’s regulatory authorities. When the Financial Action Task Force came into existence in 1989, then the term “anti-money laundering” became more popular and Heads of different countries started to make policies to combat money laundering. Let’s discuss FATF regulations in detail.

FATF – The Global Financial Regulatory Authority

FATF is an intergovernmental regulatory body that makes policies for all the countries to meet security standards to prevent money laundering. Currently, FATF has 37 member countries. Those countries that do not comply with FATF regulations, FATF imposes sanctions on them. To avoid money laundering, countries are required to meet FATF regulations that include:

  • Keeping the records of high-risk entities.
  • Conduct KYC compliance and update the lists of potential customers.
  • Perform ongoing monitoring of high-risk businesses.
  • Imposed sanctions on those businesses that do not comply with their respective country’s AML regulations.
  • Perform FATF suggested due diligence regulations.

AML Compliance

The process of ongoing monitoring and screening of businesses or customers to stop the efforts of money laundering is called AML compliance. It is usually done by matching the entities with global watchlists, sanctions, and politically exposed person’s lists. AML compliance not only eliminates non-compliance fines and avoids financial fraud. It also helps businesses to establish good B2C and B2B relationships with improved brand image. Every business of any country has to follow FATF regulations as well as their respective country’s standards. Let’s discuss the AML regulations of the UK, USA, and EU.

AML regulations of UK

In the UK, The Financial Conduct Authority is responsible for making policies for AML compliance. FCA regulates, supervises, and authorizes businesses to protect customers, increase market trust and prevent money laundering. 

AML regulations of USA

In the USA, all financial institutions have to follow the rules of  “The Bank Secrecy Act” (BSA) to meet  AML regulations. BSA is managed by the Financial Crimes Enforcement Network (Fincen) to stop money laundering. Those businesses that do not comply with BSA have to pay fines up to $250,000.

AML regulations of EU

In the EU, 5AMLD and 6AMLD make AML regulations for businesses. The fifth anti-money laundering directive makes policies for cryptocurrency regulations and new legal requirements for prepaid cards etc. The sixth anti-money laundering directive expands the current legislation and makes the penalties tougher to make strict rules to combat money laundering.

 

By complying with AML regulations, businesses identify high-risk entities and prevent financial crimes. It also provides data security to the businesses and customers by screening them by matching with sanctions and PEPs list.

Conclusion 

By complying with KYC-AML guidelines, businesses can meet all security standards led by FATF and the respective regulatory authorities of their countries. AML compliance also helps them to improve their brand reputation and keep criminal figures at bay to avoid financial crimes. Therefore, AML KYC compliance allows businesses to make good relations with other businesses and give their customers risk-free services.

 

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