Solutions to help companies combat Money laundering and promote compliance.
What is Money Laundering? Money laundering is the process of legalizing the proceeds of crime. The process involves introducing the money into the legal financial system. The cash is then circulated into different accounts as a way of creating confusion. Finally, the launderer integrates the funds into the financial system. Such money often encourages acts of terrorism and drug trafficking.
History of Anti-Money Laundering
The Bank Secrecy Act created in the year 1970 acts as a layer of security against financial crimes. The Act provides regulatory authorities with the right tools to curb money laundering. Congress passed the Patriot Act, which lays down compliance requirements in 2001. The law gave authorities powers and new ideas to combat money laundering. It also tackled terrorism financing.
The Patriot Act calls for all financial institutions to do customer due diligence. The process involves identification of a customer’s details. It also includes maintenance of the personal data and records for future reference. Banks now have to check whether a customer is among the wanted list of criminals in the country. They also have the mandate to confirm the nature of business a client conducts and its legality.
Risk Management for AML
Financial crimes have become pervasive in recent times. Thus, risk management is a necessity for every financial institution. Transaction monitoring systems are now compulsory for financial institutions. These systems enable institutions to combat money laundering and other financial crimes. They offer flexible risk management tools. These tools also equip them with the Know Your Customer (KYC) compliance system. Most transaction monitoring system software have KYC compliance. It helps banks to gain an intuitive prediction of any suspicious customer activities.
The KYC compliance systems also help to identify the ultimate beneficial owners. Most countries have allowed financial organizations access to registry information. Such access enables the identification of the ultimate beneficial owners.
Automation in AML
Risk management processes in AML call for technology and automation. Most financial institutions have adopted Robotic Process Automation (RPA). They use RPA in their KYC compliance and transaction monitoring systems.
Manual risk assessment and monitoring is expensive and time-consuming. Risk analysts who use manual systems can only work with a small data set to confirm a security alert. Automation takes less time. It also allows analysts to conduct thorough investigations using a broader data set. They can do more extensive data checks. It ensures that they consider more parameters. Such tests are necessary when investigating both domestic and international high-risk accounts.
Financial Sanctions in Money Laundering
The RegTech industry needs to follow all the regulations set for money laundering. That includes the knowledge of the sanctions regime, which applies to some high-risk foreign countries, and terrorist support groups. It also applies to drug trafficking regions. The US imposes either comprehensive or targeted economic sanctions on individuals and sectors. It also sanctions industries, states, or continents that pose a threat to its security. As such, the law expects financial institutions to comply. They have to flag any suspicious activities from any member of a sanctioned regime.
Special committees and monitoring groups manage the typical UN sanctions regime. The European Union also uses sanctions as part of its Common Foreign and Security Policy. The United States applies financial and economic sanctions more than any other country. The Treasury Department has its Office of Foreign Assets Control (OFAC). That body administers the more than two dozen existing US sanctions programs.
Money laundering is a challenge in almost all countries globally. As such, government authorities have come up with compliance regulations for financial institutions. The laws created help in risk assessment. It also helps with monitoring of both local and international high-risk accounts.
About AML Market Research and Strategy Consulting Solutions
SIS helps FinTech companies and Financial Services organizations to combat Money Laundering, and to adopt Regulation Technology (RegTech). Our solutions include:
- Technology Adoption Consulting
- Competitive Analysis
- Trend Analysis
- Expert Procurement
- Customer Market Research
- Industry Tracking
- Regulation Technology Assessments