As fraudulent attempts grew stronger in recent years, industries continuously heard the word risk-based approach quite more frequently. Regulators expect know your business to incorporate risk-based models in their AML compliance process. By implementing risk-based processes, organizations can ultimately control criminal activities like money laundering or terror financing. Therefore, businesses can reduce any false positives or negatives by classifying the threats according to the various risk levels.
Before digging any further, organizations can improve their AML anti-money laundering process by following some specific steps. Here you might ask, “What is the reason for implementing the AML screening solution?” The reason for implementing an anti-money laundering solution is simple – it helps to protect organizations from criminals, who use their system to circulate their dirty cash flow. Ultimately, this helps organizations to white-wash their dirty money and prevent criminals from taking a financial incentive with their ill-gotten gains.
Therefore, AML screening solutions help companies to track and reveal criminal activities like corruption, tax evasion, and including other crimes. Moreover, businesses could also ensure effective utilization of human resources, policies, and technologies to gain confidence in their processes. But how do you measure the effectiveness of an anti-money laundering solution? The answer is quite obvious, you don’t take on fines or penalties due to non-compliance issues.
Looking-out For Red Flags With AML Anti-Money Laundering Solution
The question is what activities or situations you should be looking out for? Here, it’s important to remember that money laundering is usually trying to convert illegitimate gains into legal funds. For this reason, organizations have to monitor the patterns that would help them to indicate money didn’t come from a legal source. Therefore, here are some unusual activities that organizations should look out for.
- Transactions of a large amount
- Identifying layering of transactions
- Breaking down the deposits to fall below the reporting thresholds
- Looking for a rapid spike in the amount due to financial activities
- Transactions that are connected with businesses involving substantial money like gambling
- Transactions that violated money laundering rules in the past.
- Identifying an individual or kyb checks business with a history of money laundering
However, all these money laundering activities can be tracked at an initial stage of the due diligence process or an ongoing money-laundering procedure. Although, during the onboarding process – the basic distinction of normal activities starts becoming apparent. Whether it means a classification of accounts or setting up the processes to make sure when something requires another look and how often. However, it’s not enough to notice a red flag while filing a suspicious activity report (SARs) to the regulators. It requires handling any crucial events by implementing clear processes to ensure a meeting with AML anti-money laundering compliance.
Anti-money Laundering Screening Solution
Often the best way to mitigate risks is through a rigorous detection and management of accounts. By performing various check identity through AML screening, organizations can prevent fraudulent risks along with risks of non-compliance that include the circulation of dirty money within the legal system. After getting customers through the initial check, the anti-money laundering system would catch bad customers in the midst of an onboarding process.
With time, as organizations keep up with stringent safeguards – fraudsters are trying new sophisticated methods to easily bypass the system. This way, money launderers can try to hide their original source of money along with the connection. By successfully blocking away such criminals who try to bypass the safeguards – a prevention system will provide more security in the future.
It usually entails implementing an AML screening program to collect data from different government sources or law enforcement agencies. An automated AML screening solution automatically scans through various watchlists like PEP (Politically Exposed Persons) lists to identify individuals or organizations associated with money laundering, terror financing, or any other illicit activities.
Tracking Activities With AML Anti-Money Laundering on Ongoing Basis
Compliance is not complete even after passing through the initial phase of an onboarding process. It’s important to conduct monitoring of suspicious actors on an ongoing basis. AML anti-money laundering tracking is often referred to as continuously tracking the ongoing activities to meet the compliance requirements.
The system keeps track of various activities like suspicious elements, new regulations, information monitoring, employee surveillance, scanning watchlists, etc to meet the regulatory requirements.
Even after meeting the AML KYC regulations during the customer onboarding process, ongoing tracking of activities is crucial after the initial phase. For this reason, financial institutes need to keep a track of any malicious activity or attempts of money laundering or terror financing.
Automation doesn’t necessarily drive 100 percent accuracy and reduction in errors. But by assigning a smart algorithm along with data processing into the computer, automation can help to streamline the entire process. It offers a reduction in regulatory risks and avoids damage to the brand’s reputation. For this reason, fulfilling AML KYC requirements continuously increase the demand to meet compliance and ensure effective due diligence, fraud prevention practices are fully enforced.