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Anti-Money Laundering

AML, also called Anti-Money Laundering, is a process that substantiates the policies, laws, and regulations to hamper the process. In short, it is a process that prevents money laundering. The AML policies are created by global and local regulations that are established around the world to curb financial crimes. The compliance process may be a complex one but, companies have to agree or adapt to the AML regulations. 

For the process to happen, aml compliance departments are available in companies, and they make the approach easier for them to happen. 

Money Laundering:

First of all, what is Money Laundering – it can be understood as the legislation of the money obtained illegally. Money Laundering is a huge financial crime. It is also defined as a method that is used to conceal the nature, source, and act of crime or also defined as a method to display a legal image. 

Money Launders may adopt various techniques to carry out the crime of money laundering, and these techniques are said to be directly proportional to the development of technology, i.e., increase in the standards of technology, more are the financial crimes. A survey conducted by the IMF also called the International Monetary Fund reports that the money laundering rate is 2-5% of the world’s GDP. The ratio is considered to be an exorbitant sum of the total money in the world. 

As said earlier, to put a stop to this crime and ensure that the criminal activity is identified, the global and local regulators have set forth new principles to prevent money laundering. The principles or regulations are said to be Anti-Money Laundering (AML). 

The Anti-Money Laundering Process: 

The supreme aim the AML regulations serve is to curb money laundering. As a part of the process, a series of principles or procedures are published by the regulators to achieve Anti-Money Laundering. 

  • Know Your Customer (KYC): KYC, also called Know Your Customers is one of its procedures. Companies need to know their customers. The information that is provided by the customers helps the company understand the transaction details and also identify suspicious transactions. 
  • Customer Due Diligence (CDD): Another important measure of the procedure helps the company understand the transaction details and also identify suspicious transactions. 
  • Enhanced Due Diligence (EDD): CDD may not be sufficient enough to do justice in recognizing and resolving the customer issues and thus, EDD was proposed. EDD stands for Enhanced Due Diligence. This is a process of KYC due diligence that enhances the scope to a higher and authorized level of investigation. 

Other than knowing the customers and their risks, it is vital to the aml compliance programs to keep a check on the transactions made by the customers. On constant monitoring, suspicious transactions can simultaneously create alerts. 

AML Transaction Monitoring Software: 

If a suspicious transaction is happening, then an alarm is generated by the monitor. This is when the AML Transaction Monitoring Software pays its part in automatically obstructing the transaction. The transaction is then examined in detail by the companies’ compliance or the risk department. This department is eligible to notify the transaction to the AML, CFT, and KYC regulators if a crime is detected in the transaction. The process is to be submitted in the form of a report called the Suspect Activity Report (SAR). 

Importance of AML Compliance:

Money laundering is a technique that criminals adopt to hide their crimes as well as the money. The financial institutions also become responsible for contributing towards the increase of financial crimes if they do not comply with the AML regulations.

Well, it is imperative to be careful while making any transaction or even for that matter, receiving money from a completely unknown person. Be cautious!

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