Governments everywhere have stepped up their efforts to stop money laundering in recent years, passing laws requiring financial institutions to set up processes to keep an eye out for and flag questionable activity.
Financial institutions are accountable for ensuring they have sufficient anti-money laundering policies and procedures that comply with legal requirements. FIs must act to accomplish this by using compliance solutions that provide AML certification online for employees.
Rules to Combat Money Laundering
Create policies for AML compliance
Compliance procedures must be established to strengthen an organization’s AML framework. A compliance policy outlining the organization’s anti-money laundering practices ought to be provided to all team members.
Financial institutions endeavor to avert revenue generated from illicit activities by enacting anti-money laundering procedures. These rules must be followed for every organization to develop a compliance culture.
Look for Abnormal Patterns
The most crucial method for identifying red flags is to monitor transaction patterns. While performing ongoing monitoring, some patterns to look out for include frequent transfers to or from dangerous or sanctioned jurisdictions, numerous small-value transactions to the same account, and transactions to offshore accounts.
It is necessary to make this mandatory for PEPs and approved organizations. Today, businesses may use their current data to evaluate and spot trends, create a customer model, and look into any suspicions.
Give KYC procedures a priority
AML regulations mandate using KYC procedures to verify a customer’s identification. Since it happens at customer onboarding, this is frequently the only AML protection a consumer receives in their lifetime. A top-notch KYC system is essential for verifying client information and confirming that consumers are who they say they are.
Financial statements, fingerprint and facial recognition software, and identity documents are just a few of the tools used in this procedure. Simplifying your client verification processes can help you adhere to legal requirements and eliminate questionable accounts.
Educating Members of the Team
Having the appropriate team is essential for combating money laundering. Organizations should consider recruiting a compliance officer to oversee staff training, warn stakeholders of any questionable conduct, and take appropriate action when there is even the remotest suspicion of financial crime.
It is also critical to assign someone to oversee the suspicious activity detection process and keep up with news, legislation, and technological developments. First and foremost, you need to ensure that the people working for you know the rules and can recognize and react to transactions and other activities that may be connected to money laundering.
Suspicious Activity Detection with Technology
While manual methods exist for detecting questionable activity, using compliance software simplifies the process and allows teams to perform better. These technologies assist risk and compliance experts with transaction monitoring, reporting suspicious activity, and regulatory compliance.
The advancement of digital products has led to increased fraudulent activities such as money laundering, cyberattacks, and data breaches.
Adopt a Risk-Based Strategy
Knowing the risks your company confronts and implementing controls based on their possible effects are the cornerstones of a risk-based approach. This approach allows financial institutions to organize their efforts according to the real threat they are facing.
Regulators are shifting from prescriptive measures to risk-based approaches in many compliance-related areas. This technique varies depending on each customer’s risk score. As an alternative to using a one-size-fits-all strategy, it assists in identifying a customer’s risk profile and implementing risk controls appropriately.
Conclusion
No matter how much internal resources or money you devote to your compliance program, no financial organization is immune to “not doing enough” regarding anti-money laundering compliance. Learning from the mistakes made by leading institutions helps put compliance challenges into perspective.
Employing more strategies to stop money laundering will ultimately help eradicate it. Regulations against money laundering play a major role in establishing guidelines and practices for the AML compliance team.