Anti-money laundering checks or AML checks refers to the customer due diligence measures needed by regulated businesses to act in accordance with the money laundering regulations and prevent financial crime. The AML checks generally range from basic know your customer (KYC) verification to real-time screening. They are specifically designed to identify customers and evaluate their related risk.

AML checks act as a protection to prevent businesses from becoming directly or indirectly involved in any kind of suspicious criminal activity. Regulated businesses that fail to undertake these checks are likely to address significant fines as well as other serious consequences.‍ Anti money laundering checks play an important role in meeting the basic regulatory requirement to undertake ongoing customers. These checks are about knowing your customers, verifying those customers, and ensuring relevant understanding of any risks associated with doing business with them.

It is way too difficult to figure out the problem of money laundering, but it has been roughly estimated by the International Monetary Fund (IMF) globally in one year is 2% to 5% of global GDP, or US$800 billion to US$2 trillion.

Very often the money laundering follows wrong activities like smuggling, illegal sales of arms, embezzlement, bribery, insider trading, and computer fraud schemes. Anti money laundering kyc is essential against planned crime actions such as human trafficking, arms or drug trafficking, and prostitution rackets.

Apart from the moral cruciality to fight with money laundering and terrorist financing, financial institutions also implement AML check tactics for the below:

• KYC AML Compliance with rules and regulations that needs to keep a track of customers and transactions and report any kind of doubtful activity.
• Safeguard your brand credibility, reputation and shareholder value with a proper KYC process.
• Keep away from consent orders, civil and criminal penalties that will be imposed because of non-compliance and lack of AML checks.
• Curtailing of costs regarding fines, employee and IT costs, and capital retrained for any kind of risk exposure.

Anti money laundering KYC is connected closely with counter-financing of terrorism (CFT), which financial institutions use to fight against terrorist financing. anti money laundering regulations money laundering with terrorism financing.

Top 6 Reasons Why Anti Money Laundering Checks are Important

1. Regulatory Action

All the enforcement actions that are related to anti money laundering checks (AML) have witnessed a significant rise. The regulators have imposed about $32 billion in AML-related fines worldwide since 2009.

2. Evolution of Threats

All the methods followed by criminals have gone through metamorphosis over time with the development of technology drastically and it is quite difficult to solve. The criminals have been segregated into three separate groups.

• The first category of criminals is lone-wolf terrorists. These criminals basically sell weapons and vehicles at low-cost transactions that are quite difficult to identify and response times is highly critical.
• The second group of criminals is cyber-enabled. These people use weak points of technology. They use highly advanced technology and insider information.
• And the third and last type of criminals are e-commerce criminals. The market value of e-commerce, which has remarkably grown with the impact of COVID -19 pandemic - approximately $ 2.4T. It is very easy for these criminals to show them as online merchants or payment providers.

3. Reputational Risk

Many financial institutions give high priority to their reputation as they are long-standing brands. Any sort of AML check crisis can dramatically impact their credibility and reputation. As the size of the hyper competitive market volumes are huge simultaneously the brand values are significantly high. That way they will face a disaster with the loss. By leveraging anti money laundering regulations, brands can not only combat the challenges but also increase brand awareness to convince consumers of the safety of the business.

Many of the companies who have been investigated or fined may not be trusted by their customers. They have lost their brand face value and customer trust. And the corruption charges related to finance are highly serious, and they can make headline news. Businesses want to play safe and do not want to make headlines with such awful news that defames their name over the media. They are very concerned about securing their reputation.

4. Accelerated Costs

Anti money laundering checks usually demand strenuous manual effort. As a result of which the effort makes the operations highly inefficient and difficult to scale. The US financial services spent about $ 23.3 billion to prevent money laundering risks in the past years.

5. Bad Customer Experience

The AML check compliance is all about requiring more than one contact with the client. The speed of online shopping and communication in the current time impacts the customer experience negatively. One out of three financial institutions has lost many of their potential customers due to slow and inefficient onboarding processes.

6. Financial Crime is Quite Difficult to Stop

In the current time there are many financial institutions that are taking significant steps and measures related to corruption and money laundering. Despite all the efforts taken, financial crimes are still prevailing all over. In the United Kingdom, 80 billion pounds were cleared in, which means that imposing anti money laundering regulations is more crucial than ever.

Role of AML Checks in Different Sectors

Anti money laundering KYC are highly critical for all the financial institutions along with other organisational sectors. These institutions are in different kinds of sectors. They vary in the amount of money and their client groups are so different from each other. Due to the differences the risk level also varies. Some examples of institutions are banking sector, money transferring industry, casinos & gaming industry, real estate sector, payment and currency exchange industry, investment and insurance industry, and leasing industry

Regulatory Compliance

Regulatory compliance refers to maintaining all the rules and regulations that are set out by the regulators. The state proposes meeting all the regulatory requirements to the whole extent, as needed by regulatory agencies. Meeting regulatory requirements is a primary requirement for everyone being a part of the regulated industry. All the regulatory agencies make these regulations across the world, who intend to make these regulations to assure the quality of products made by organisations in their industry.

AML compliance is an important part of any business, and ClearDil offers perfect solution for any business looking for an easy and efficient way to perform their AML checks.