Don’t Need AML Compliance? Think Again!

The majority of the businesses believe that they do not need to comply with AML regulations at all. However, this is a big misconception and if you are a part of this segment too, think again! You are missing out on one of the best methods to acquire legitimate customers and a chance to build a brand reputation that all your competitors would envy. Remember that your carefree days are only a handful without a robust anti money laundering mechanism in place. We live in a world where financial criminals are crawling in every sector. So, AML compliance programs are what you need. 

Let’s discuss this in more detail with some facts and real world examples. 

AML Compliance for Businesses in Light of Regulations

PwC conducted a survey in the end of 2020 among 5000 respondents and found out that every company reports 6 frauds on average and an eye-watering USD 42 billion was lost to frauds. Other reports reveal that pandemic also contributed to a significant increase in the financial crime rate. Regulatory bodies and FATF have already imposed many restrictions to prevent money laundering and other fraud attempts not just in the financial infrastructure but other industries too. Let’s discuss the major ones, shall we? 

FATF Recommendations

The Financial Actions Task Force (FATF) recommendations state that:

• Businesses must identify FinCrime threats in the current systems and policies
• They must implement policies and systems in the corporate infrastructure to combat money laundering and terror financing

You can find out more about the 40 recommendations here: | 40 recommendations of FATF – Shaping the future of your business 

FATF’s travel rule states that all virtual asset service providers (which we commonly call crypto and forex platforms) must employ robust AML/CFT policies and customer due diligence protocols. Before July 2020, this law was restricted to the finance sector and the body extended the scope of its rules to VASPs.

EU’s 6AMLD 

The European Union enforced the sixth anti money laundering directive in December 2020. The deadline for meeting the requirements by June 2021. This directive has targeted loopholes in the previous regulations and its sole purpose is to prevent FinCrime in every industry. As per 6AMLD, the threshold for transactions has reduced for FinTechs and financial infrastructures. It elaborates on 22 predicament offences that are not only a concern for banks and NBFIs but other companies as well. Anyone found guilty of money laundering and terror financing shall be liable for fines and imprisonment of one to four years. 

FinCEN’s Call for Businesses

To make regulations clearer and more precise, FinCEN also extended its AML policies to cryptocurrency exchanges and digital wallets in December 2020. Moreover, the Biden government has increased FinCEN’s budget by 50% to ensure better defense mechanisms against criminals. 

Recommended: The Changing Landscape of KYC/AML Regulations in 2021 

Real World Examples Proving the Perception Wrong

Regulatory bodies in various regions of the world have amended laws to ensure that firms operating in every industry fight fraudsters effectively. Here are a few real world scenarios that can help you understand the vitality of AML compliance. 

Money Laundering in the Art Market 

A report revealed that the art market is an emerging sector that is attracting more funds than what one could have expected. In 2020, Jamie Botin was fined EUR 52 million for smuggling a Picasso painting. The painting was worth EUR 26 million and the prosecutors revealed that the accused was hiding the painting for a very long time to hide his black money. 

Here’s how money laundering in the art market works: 

There are many reasons that make the art market an attractive outlet for criminal activities. 

1. Anonymity of buyer and seller makes it convenient for imposters to hide their money 
2. Generally, offshore accounts are used for transactions
3. Many intermediaries are involved in a transaction 

Cryptocurrency and FinCrime

Cryptocurrencies are the hot topic in 2021 thanks to Tesla. Nevertheless, they have been in the news for financial crime and its continuous increase. According to Statista, crypto-related crime accounted for 513 million USD in 2020. With reference to the increasing crypto-related crime (especially money laundering), Turkey banned crypto trading in the country as a measure of FinCrime prevention. 

These are decentralised digital currencies that offer anonymity to all traders. Therefore, a great way of hiding illegally earned money. 

Educational Institutions – Potential Target of Financial Crime  

Although unintentional, educational institutes have been involved in money laundering activities lately, a report from The Times revealed a few months ago. These institutes accept fees in millions from foreign students who belong to high-risk jurisdictions. 

A former security analyst in the US government said, 

“Universities that accept cash are at high risk of laundering the proceeds of crime, corruption and other illicit activities. Universities that fail to conduct basic due diligence cannot plausibly deny that they are involved in money laundering.”

So you see, not even educational institutes are secure these days. 

Hybrid Technology and AML – Increasing Barriers for Criminals 

Shufti synergizes human and artificial intelligence to provide your business with an AML compliance solution that filters fraudsters before they can cause any trouble. From background checks to ongoing anti money laundering screening, your company is safe from financial crime in the digital world. Note that fraudsters are now equipped with technology that helps them in achieving their illicit goals. Your business also needs a digitally advanced system to verify identities, comply with the changing AML regulations and avoid hefty penalties in the future. 

Suggested: Record-Breaking Fines on Banks for KYC/AML Non-Compliance 

In a Nutshell…

The coronavirus pandemic not only increased operational challenges but also resulted in increased fraud rate. Law-making bodies stepped up and imposed more regulations to fight crime. However, the corporate world still believes that customer due diligence is the problem of the financial institutions only. Many cases emerged last year which indicate that AML compliance is important for all sectors. 

To find out more about AML compliance solutions, talk to our experts.