Anti-money laundering (AML) refers to a set of procedures, laws and regulations designed to stop criminals from generating income through illegal actions. Directives such as the Bank Secrecy Act (BSA) in the U.S. require financial institutions to prevent, detect, and report money laundering activities. Though anti-money laundering laws cover a relatively limited number of transactions and criminal behaviors, their implications are far-reaching. AML screening software lets companies meet their regulatory requirements by helping to keep money launderers away.
AML regulations require financial institutions issuing credit or allowing customers to open accounts to complete due-diligence procedures to ensure they are not aiding in money laundering activities or financial crimes. These companies must practice enhanced due diligence and ensure their customers are not taking part in a money laundering scheme. They must also verify where large sums of money originated, monitor financial transactions and report suspicious activity.
An AML compliance program helps organizations like financial institutions, money-service businesses and insurance companies monitor transactions to uncover suspicious and potentially criminal behavior, like money laundering or terrorism financing.
An AML program consists of the following:
But it can be difficult, if not impossible, to maintain AML compliance manually and meet your AML program requirements in a given jurisdiction. There are so many stops along the customer journey that creating compliance checks at each stage would create a clunky user experience.
Jumio streamlines the process by automatically identifying and screening your customers, during onboarding and beyond.
Many financial institutions often blur the lines between KYC processes and AML practice, and as a result incur regulatory fines.
Know Your Customer (KYC) is primarily the identity verification process. Its principal purpose is to better understand your customers and their financial dealings, thus managing risks efficiently.
Two important KYC processes include:
Generally, customers who are classified under the high risk category after CDD are prone to money laundering and financing of terrorism. Hence they are regulated and monitored as per stipulated norms. EDD procedures can include verifying politically exposed persons (PEP) and adverse media that puts them at higher risk.
After customers are onboarded, companies must perform ongoing monitoring to ensure their customers are still suitable to do business with.
Regulators confirm whether organizations are complying with regulatory AML rules. These safeguards help to detect suspicious transactions like money laundering and terrorist financing.
Online identity verification is the starting point for AML compliance in the digital world. If the EU’s Sixth Anti-Money Laundering Directive is any indication, governing bodies are becoming more comfortable with, and some would suggest even encouraging of, the use of digital customer identity verification.
The European Commission recognizes,
“Accurate identification and verification of data of natural and legal persons is essential for fighting money laundering or terrorist financing. Latest technical developments in the digitalization of transactions and payments enable a secure remote or electronic identification.”
According to Gov.UK, organizations must perform due diligence by carrying out checks on their business and customers, and maintain records to help prevent money laundering. Customer due diligence works hand in hand with customer identification programs (CIPs). It is a financial organization’s responsibility to check and verify who a customer is. In practice, this means obtaining a customer’s name, photograph on an official document that confirms their identity, residential address and date of birth. The best way to do this is to ask for a government-issued document like a passport, along with utility bills, bank statements and other official documents.
AML and KYC go hand in hand when it comes to the role of online identity verification.
To help meet your AML compliance obligations, look for a solution that offers these features and benefits:
Any organization that enables its users to exchange funds is subject to regulatory oversight and must adhere to the compliance requirements of AML laws.
Financial services such as banking and fintech are the most common industries affected by AML requirements. However, AML laws are becoming broader all the time and impact many industries including gaming, ride sharing, online marketplaces, art exchanges, cryptos, and many more.
AML compliance is the responsibility of the entire senior management team, with an AML compliance officer (such as a Chief Compliance Officer) leading the effort. AML training must be provided across the company so that all employees know how to comply with AML laws.
Your anti-money laundering compliance program should identify a customer’s money laundering risk before they ever do business with you. It should also reassess their risk throughout the entire customer journey. These risk-based procedures allow you to tailor your AML rules to ensure higher-risk customers are treated with greater scrutiny.
An AML compliance program is a formal effort on the part of your company to enforce AML regulations. At a minimum, you need to designate a compliance officer, establish written rules and procedures, establish an education program for employees, and create a review and monitoring system. If you do not take these steps, your business can fall prey to financial crimes from drug trafficking, terrorist financing and politically exposed persons.
Jumio helps companies meet their regulatory requirements through effective risk management. By identifying the true identity of your customers, and by screening them during onboarding as well as periodically throughout the customer lifecycle for AML risk, you can help keep money launderers away from your business.
Jumio provides an end-to-end platform that helps you meet your regulatory obligations and mitigate AML risk throughout the customer journey, from onboarding to ongoing monitoring.