Identity Verification
AML Compliance: Step by Step
Learn about Anti Money Laundering (AML) regulations and discover 5 steps to developing an AML program for your organization.
October 30, 2023
min read

What is Anti-Money Laundering (AML) Compliance?

Money laundering is a financial crime with the purpose of making criminally-obtained money appear as if it were obtained through a legitimate source. Once this is achieved, criminals use the money through regular channels like banks and for regular financial transactions. 

Anti money laundering (AML) practices, techniques, and technology help financial institutions and organizations comply with legal requirements. The AML measures implemented by an institution depend on laws set by local and national entities as well as global industry standards. 

AML compliance is enforced by several regulatory entities, each requiring different measures. To achieve AML compliance, financial institutions and relevant organizations must actively monitor and report suspicious activity. It typically involves identity verification, background checks, and screening customers against global watch lists and sanctions restrictions. 

AML screening is a mandatory measure in many industries, including FinTech, stock exchanges, banking, cryptocurrency, real estate, gaming platforms, precious metals, art trading, and legal services.

In this article, you will learn:

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What are the Latest AML Regulations?

To keep up with the constantly changing money laundering techniques, AML regulations are continuously updated as needed. AML was first introduced by the Bank Secrecy Act (BSA) in 1970 in the United States. Since then, the BSA has been amended and other regulations were created. Here are several of the most recent AML regulations changes introduced worldwide:

  • The European Union’s Sixth Anti-Money Laundering Directive (6AMLD)—expands to update what money laundering means. It also allows the criminal prosecution of legal individuals and businesses, and imposes increased penalties and prison time.
  • AML 2020 Act—considers the most extensive reform of the U.S. AML regulations in the past twenty years. Notable changes include language added for the purpose of eliminating anonymous holding companies, known as shell companies. It also expanded the definition of money laundering to include virtual currencies and antiquities traders.
  • AML regulations in Singapore—expands the definition of AML to include virtual asset service providers (VASPs) like digital currency businesses.
  • AML regulations in South Korea—passed new AML rules designed to regulate digital currency businesses.

5 Steps to Developing Your AML Program

An AML compliance program includes all techniques, practices, and tools used to achieve AML compliance on a regular basis. The main goal is to expose and respond appropriately to any money laundering or terrorist financing incidents, as well as other fraud risks.

AML compliance programs include everything the organization requires to achieve compliance, including internal operations, monitoring and detection processes, user-processing policies, and procedures set to report on money laundering incidents to law enforcement and any relevant parties.

Here are several guidelines that can help you develop an effective AML program. These are general guidelines—you must customize your AML program and controls around the specific controls and requirements specified by the relevant regulations.

1. Due Diligence

Customer due diligence (CDD) is the process of creating a customer profile that evaluates them for potential terrorist financing and money laundering risks. It involves the use of risk scores, which are calculated using AML and Know Your Customer (KYC) checks, during which customers are screened against databases like Politically Exposed Person (PEP).

2. Identifying Suspicious Activities 

To remain compliant with AML regulations, organizations must monitor for any suspicious activity that may indicate a fraudulent transaction or customer. Once the organization has identified suspicious funds and activities, they must report the activity or transaction directly to a  financial intelligence unit (FIU). Each country establishes its own FIU, created for the purpose of managing the flow of reports, data, and intelligence between relevant agencies. 

3. Tailored Internal Policies, Procedures, and Controls

AML-compliant organizations are required to implement and maintain certain internal controls, procedures, and technologies used to detect and report on financial crimes. AML compliance programs should also include a regular review to ensure all controls remain effective. 

When creating an AML compliance program, the organization should clearly define and document AML-related aspects, including how records are maintained, how currency transactions are reported, how to obtain customer identification, how to detect and report suspicious activities, and what is the required ongoing training needed for employees.

4. Ongoing Training of Employees

Employees should be educated on their responsibilities and roles within the program. This could mean training on properly conducting CDD as well as ensuring everyone has a clear understanding of the policies and procedures governing the organization. To ensure everyone is well versed in the details of the programs, organizations can create standard training all employees must complete and add AML-specific training that help specific employees learn more about the program. 

5. AML Compliance Officer

Organizations are required to institute a compliance officer role to be responsible for AML compliance programs within the organization. This role is responsible for assessing the AML processes and policies of the organization and then advising the organization on how to improve the program. The role is also required to communicate with and report to the authorities, auditors, and senior management.  

How Can Technology Help with AML Compliance?

AML compliance requires ongoing screening of customers. Technology can help make this process more efficient and accurate. For example, identity verification solutions powered by artificial intelligence (AI) can accurately and quickly verify the identity of your customers and screen it against global lists.

While it is possible to perform manual AML screening, it is a time consuming task, and is inconvenient for customers. Technology helps make the process more efficient and makes it possible to perform screening online. Organizations can create their own customized solution to fill specific requirement needs, or use out-of-the-box solutions that provide AML verification, KYC verification, and money laundering verification.

AML Compliance with BlueCheck

BlueCheck’s industry leading identity verification infrastructure enables merchants to grow their business faster. Serving a wide variety of industries, our solutions are custom tailored to the unique needs of our customers, including PACT Act and eCommerce compliant offerings. 

Schedule a call with a BlueCheck specialist to learn more about our Age & ID Verification solutions. Ask about price savings when bundled with Payment Processing services.