Time and again, we see several cases of illegal movement of money. These money movements happen through phishing scams, account takeovers, malicious malware, or other mediums. Such money laundering activities bring serious damages to the financial sector, thereby affecting the economy negatively. It benefits the corrupt public officials, terrorists, blackmailers, drug traffickers, illegal arms dealers, and the middlemen involved while shatters the economy, financial security, and social aspects of a country ( best practices ).
What is money laundering?
Money laundering is a process of concealing the origins of money generated through a criminal activity by passing it through multiple bank transfers or commercial transactions to show it as originating from a legitimate source. Anti-money laundering (AML) is a set of policies, procedures, and regulations implemented to prevent money laundering. Global regulators define the AML policies for international financial transactions while national regulators of each country have a separate AML policy. Companies have to follow the AML policies set by their government and appoint an AML Compliance team to monitor the compliance. ( best practices ).
Why is it important to have an anti-money laundering policy in place?
An anti-money laundering policy is important for the following reasons:
- AML policy helps to tackle money laundering, which also leads to the identification of all types of criminal activities and catching hold of the criminals.
- With AML policies in place, it is possible to save a country’s financial system and the economy from the after-effects of money laundering.
- With an increase in digitalization, there is a rise in the types of digital financial systems, which have increased the opportunities by which money launderers and criminals can enable the movement of illegal funds. Therefore, a more robust, innovative, intelligent AML strategy is required, which can use digital innovative solutions such as electronic identity verification solutions and others.
- Globalization has resulted in multiple financial transactions between countries. If a strong AML compliance strategy is not put into place for a company or a country, its attractiveness to other companies and countries weakens because people will be wary of having business transactions with them.
- Customers trust companies, which have an anti-money laundering policy and management, and if AML compliance is achieved, there are higher chances of customers becoming loyal. Therefore, AML compliance is essential to ensure regulatory well-being, brand reputation, business stability, and long-term profitability.
With the understanding of the importance of AML compliance, firms must employ the right business practices to manage the risk of financial crime in their operations. Following strategies may prove useful to firms:
Appoint a competent AML team
Employ AML specialists that have the knowledge and expertise to identify the money laundering risks and assess them for business impact. Appoint one AML Compliance Officer who ensures that policies are followed, create reports, conducts training, and guarantees the smooth running of the AML compliance system. ( best practices ).
State company-wide AML policies and regularly update them
Companies must consider the best practices in AML and design a specific set of policies for their firm, state them clearly, and share it with all the employees and staff members. Keep updating these AML policies as and when changes occur in the national regulations or global best practices. ( best practices ).
AML policy must align with your business goals
The financial crime risk management framework must align with the goals of your business in such a way that day-to-day business activities naturally become AML compliant. Furthermore, the AML policy framework must reflect the firm’s risk appetite.
Use data analytics, predictive modelling, and artificial intelligence in your AML program
You can also automate your AML processes with machine learning and data analytics to make the AML processes faster and effective. For this, you must conduct the required training for your staff and set up data science functions to make the most of the AML compliance policies.
Use the technology platforms that can support your AML compliance
Technology components are essential for successful AML compliance in a company since large data sets are generated and are required to be analyzed for further use. The data sets relate to the client’s identities, client monitoring, transaction monitoring, and output management. Strong technology systems ensure a clear, single view of the data for generating more insights.
Conduct regular reviews and risk-based due diligence
Companies must make it a regular practice to conduct reviews to identify the risks for your business, which may erupt in the transactions with clients, products and services, or the geographical region of the transaction. They must conduct due diligence for all third parties, customers, consultants, and associates to be sure of the party they are dealing with and the risks involved in the transaction.
Use the proficiency of risk consultants or risk consultancy service providers
If you do not wish to take up the stress of AML compliance, you can hire risk consulting service providers who will help you with end-to-end AML compliance requirements. They can support you in the client on boarding process, achieving compliance with KYC norms, designing an AML framework for your operations, and defining the AML monitoring process. However, be very sure of hiring the right team, as you cannot mess up with your anti-money laundering efforts.
Our technology, expertise, experience, and services for your risk-free operations
Our consulting services
We provide consulting services to help all our clients remain updated with AML regulations and support them in achieving AML compliance. AML consulting is a part of our risk consulting services. We have the skills, knowledge, and experience in handling the AML compliance initiatives for our clients to enhance their AML compliance to a higher level. We carry out frequent review, analysis, and execution of risk management systems across many businesses. Our competent AML/CTF risk management services make you compliant, improve your business opportunities, and increase your reputation.
There are three phases of money laundering : Placement, when the money is introduced into the financial system; Layering, when the illegal money is transferred through multiple transactions; and Integration when the money re-enters the legitimate economy.
Some of the common schemes by which money laundering occurs are cash business transactions, casino earnings, smurfing, foreign exchange, real estate, and many others.
Companies must fulfill the requirements for AML to save themselves from losing money. They must appoint a Compliance Officer, Create and state AML policies, train their employees, and conduct frequent reviews.
NR Doshi & Partners is a leading audit and assurance firm in Dubai with more than 35 years of experience in serving various industries. Their range of services includes accounting, outsourcing, business advisory, company formation, and risk consulting services. Our team boasts of a unique skill set and expertise in handling these services for clients in any industry – be it financial services, jewellery, energy, healthcare, retail, and many others. Whether you are an established business, or a small and medium enterprise, or a startup, we can assure you of the best inputs for your business growth.