
Top 10 Questions about AML Compliance Answered by the CTO of Shufti Pro

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The regulatory landscape is changing with time and a number of questions are arising. AML compliance is one of the biggest challenges for organisations, especially in the finance sector. Since the regulations have extended to many other sectors, the ambiguities have increased. Everybody needs all the answers to their questions about AML compliance like what is it, how does it work, who needs it, etc. After receiving several queries in this regard, the CTO of Shufti Pro, Shahid Hanif, decided to answer them all. The blog has covered the top 10 questions about anti-money laundering compliance that will help you for sure. Without any long discussions, let’s quickly take a look at the FAQs about AML compliance.Â
Money laundering is the act of concealing the origin of illegally earned money. Let’s say a financial criminal has earned money through drug smuggling, trafficking, etc. and wants to hide the black money from law enforcement bodies. For this, the criminal will devise a strategy and place it in a bank account, casino or even invest it somewhere. Money laundering works in the following three stages:Â
Find more details about these stages here: AML Screening – How it might infiltrate Your BusinessÂ
AML compliance is a set of policies and procedures that allow businesses to detect financial crime like money laundering and terror financing. The identity of individuals is screened against several global watchlists including PEPs, sanctions, etc. Some regulatory bodies have made this an ongoing process for updating customer profiles regularly.
KYC or Know Your Customer refers to identity verification of customers, whereas AML or anti-money laundering refers to background checks of clients to combat potential money laundering and terror financing risks. Here are the key differences between both:
Anyone who owns or controls the company is referred to as a beneficial owner by the Financial Action Task Force (FATF). Transactions and decisions can be made on behalf of these entities. Some people also call them UBOs or Ultimate Beneficial Owners. The FATF has defined two categories for UBOs:
The global regulatory landscape has remarkably evolved over time. Currently, FATF recommendations are leading every company across the world. As per FATF, all organisations have to adopt the risk-based approach (RBA). On the contrary, many countries have regulatory bodies that have imposed laws too.Â
Suggested: The Changing Landscape of KYC/AML Regulations in 2021Â
To comply with global or regional laws, there are some key elements that you must consider first. Here the five key elements that can make an AML compliance program effective:
Once you have all these elements in line, compliance with AML laws wouldn’t be a problem at all.Â
First, FATF has issued 40 recommendations that every state has to follow. These recommendations are the basis of all regional AML compliance programs. Here are some of the major regulatory bodies that have enforced AML laws in different parts of the world:
For companies, AML compliance brings in customer trust and ensures that all onboarded parties are legitimate. Be it end-users or intermediaries, Anti-Money Laundering compliance allows every company to avoid potential money laundering and terror financing risks. Moreover, it helps in identifying high-risk entities before they become a problem for the business.
For customers, it gets a lot easier to trust companies that comply with AML regulations. They can trust the company with the Personally Identifiable Information (PII). Furthermore, end-users know that they are safe from financial criminals.Â
In case a company fails to abide by the AML laws, hefty penalties will embrace them. The year 2020 had some record-breaking fines reported for AML non-compliance. A total of €12.09 billion was paid in fines by companies because they failed to fulfil the regulatory requirements. Apart from the hefty penalties, a damaged brand image is another big consequence of AML non-compliance.Â
To sum up, AML compliance programs have to be more rigid since regulations are continuously evolving. Anti-money laundering compliance programs have many minor details and resemble the KYC identity verification system a lot. It is likely that they spin your mind in no time, so we decided to ask our CTO to answer the top FAQs. After reading these answers, many of your ambiguities must have been resolved.Â
In case you have any more queries, please feel free to get in touch with our experts.Â