Digital AML Checks to Fight Money Laundering Risks

A high risk of money laundering and terrorist financing is faced by many global organisations. Money laundering is done through advanced techniques to dodge Anti Money Laundering (AML) regulations.

Businesses rely on third-party services and distributors to have a proper check on money laundering. Moreover, the business has to be conducted in different countries with varying rules and regulations.

The varying rules and regulations of conducting business in every country make global organisations vulnerable to Money Laundering, making global companies exposed to a high potential AML risk. AML Checks help in preventing illegal activities by identifying the source of money.

Even though international regulatory authorities such as IMF, FATF have formulated strict AML checks for financial transactions, the non-financial companies still do not comply with these regulations.

Non-Financial Global Corporations

It is because global non-financial organisations do not have a good understanding of how non-financial institutions could be used for money laundering. Most global organisations fail to perform due diligence to get their customer information.

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Although some companies are themselves involved in money laundering activities most of them become a victim of money laundering because they fail to comply with AML compliances. A recent story in Reuters reveals how drug cartels use non-financial global organisations to launder their money.

The story highlighted that many non-financial global corporations unknowingly become victims of these money laundering activities by drug cartels and had to face heavy fines by the governments and international AML regulatory authorities.

Common Money Laundering Techniques:

Numerous prevalent AML risks that global organisations face come with two primary sources, trade-based money laundering, and third-party payments. In trade-based money laundering, the criminals imply cross border transactions to hide the source of money while in the third-party payment scenario, the organisation receives or transfers money to the source or entity which has not received the services or products directly from the company.

The trade-based money laundering is becoming a more common AML risk that global organisations face. The trade-based money laundering is used with other techniques to further conceal the source of money.

Even though trade-based money laundering is becoming the most popular technique for international money laundering, global organisations have not taken effective steps for eliminating this type of money laundering.

Digital AML checks to diminish Money Laundering

In order to comply with the AML regulations, the companies should conduct proper AML due diligence. To follow KYC and AML compliance, Global organisations specifically the non-financial organisations need to keep check and balance and devise a basic AML program.

The global organisations should collect relevant customer information and run them through the official and non-official high-risk watch lists to identify any potential risk customer. For doing business in high-risk countries such as China and Russia it is important for AML compliance, that companies should ensure that their distributors and resellers provide lists of their beneficial owners.

Importance of AML checks for Business

Moreover, the global organisations must keep the legal documentation of their business dealings with distributors and resellers, which verify that they are complying with global AML regulations. The companies could comply with AML regulations if they put proper checks.

To wrap up, AML checks are mandatory for any business as per stringent regulation to trace and tackle money laundering. Businesses can avoid falling in the pit of fraudsters by having digital identity verification solutions integrated into the system.

Hefty fines are imposed on the businesses which are caught dealing with money launderers. So this can not only result in a loss of money but also a loss of reputation.

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