A Brief Summary of Anti-Money Laundering Compliance

Posted by William on April 1st, 2021

Money laundering is a crime that has a wide reach over different industries across the globe. Every day, we hear news about how much money is being lost through money laundering. Moreover, the news doesn’t always stop there as the reports on anti-money laundering fines and restrictions keep circulating. If you are overwhelmed by this news then you are not alone. Money laundering presents a perplexing situation for the entire world and to get a better sense of all this, let’s go through this article.

Why are Money Laundering Activities Punished?

Money laundering is considered a crime because there are a lot of negative effects of money laundering on the global economy. Also, it is the common law-abiding people who have to bear its weight on their shoulders. The negative effects of money laundering on the global economy include instability in growth rates, the demand for capital, distribution of money, and tax collections.

United Nations reports that the amount of money linked with money laundering is between 2 to 5 percent of annual global GDP. It is due to these factors governments put in place stringent procedures to curb money laundering. 

What are Some Anti-Money laundering Procedures?

Governments around the globe have implemented different anti-money laundering procedures owing to their regions or countries. Following is the list of anti-money laundering procedures across the globe.

• Global: The Financial Action Task Force (FATF)

• The European Union: EU 5AMLD and 6AMLD

• USA: Bank Secrecy Act (BSA)

• The UK: The Financial Conduct Authority (FCA)

• Australia: AUSTRAC

Are these Measures Effective?

The duty of governments and regulatory bodies is to enforce these AML compliance procedures. One can say the effectiveness of these anti-money laundering rules depends upon the shrewdness of them and how the authorities react if these are not followed. Moreover, there’s a huge amount of monetary penalties and operative restrictions imposed on organizations for non-compliance. This points to the fact that we are on the right track. But after all, when you look at the amount of money still being laundered, then an important realization presents itself that the anti-money laundering industry has still a long way to go. 

Which Fields are a Common Marketplace for Money Laundering?

There are a couple of industries where there is more laundered money than others. Some of the fields outlined in the following list may not seem unheard of, however, some have recently come ashore.

• Various types of trafficking i.e, Drug, Weapon, Human, Animal/ Human Organs, Wildlife, Cultural artifacts, etc.

• Shell Companies, tax havens, online casinos, and other related businesses.

• Cash-intensive businesses like strip clubs, car washes, etc.

• Hacking in the financial sector and electronic manipulation of records.

• Fake products i.e, clothes/shoes, electronics, historical artifacts, etc.

But Why Some Businesses are More Linked than Others?

Anti-money laundering compliance for the aforementioned industries becomes an essential yet arduous task for them even if they are legitimate. Conversely, the businesses that commit this crime, do it for the following common reasons. 

• Higher risk translates into a higher reward.

• These businesses allow more space for criminals and there is a lesser regulatory control on some of them.

• Following what is forbidden and illegal is a human trait that goes untamed by some.

How Can AML Solutions Put a Cap on Money Laundering?

The AI-based anti-money laundering solutions provide digital document and face verification of the consumers of a business. They ensure the AML, KYC, and KYB compliance procedures of these businesses. Moreover, the AML solutions provide the accuracy of results over 98%. Compliance with the AML program is made sure by screening individuals and businesses against thousands of global watchlists.

The face recognition tools are capable of verifying the ID of individuals digitally. This feature is coupled with an enhanced AI-powered document verification service. As AML compliance involves a handful of sensitive documentation, this combination hits the nail right on the head. Moreover, reading and extracting the information from the documents is streamlined by the use of intelligent OCR technology. Hence, compliance of businesses with AML and KYC procedures becomes a walk in the park for them.