Anti-Money Laundering (AML)

AML processes can vary depending on a company’s location and industry, but their primary aim remains consistent — detecting money laundering. To comply with AML laws, businesses need to establish a comprehensive AML framework:

• Implement Know Your Customer (KYC) methods to verify customers and other businesses.
• Use automated AML screening tools to screen against sanctions and watchlists.
• Identify the ultimate beneficiaries of legal entities through thorough due diligence, with enhanced procedures based on assessed risk levels.
• Monitor customer activities to detect and report suspicious deposits or transactions. 
• Maintain documentation related to client identification and transaction records.

The Anti-Money Laundering Act is a set of laws and policies aimed at stopping money-laundering crimes in the US. This effort involves teamwork among different US and international government agencies because money laundering often happens across borders. 

Here are some other important US laws that fight against money laundering:

• The Bank Secrecy Act (BSA). Also called the Currency and Foreign Transaction Reporting Act, was established in 1970 as the initial law to address and prosecute money laundering via banks and financial institutions. It mandates banks to assist government investigations to detect the financing of illegal activities by monitoring their activities. Under the BSA, banks must file a currency transaction report (CTR) for any cash transaction surpassing the threshold of USD 10,000.
• The Patriot Act was put into effect following the 9/11 terrorist attacks. It aims to prevent and penalize terrorist activities both within the US and globally. It also improved cooperation between banks and government anti-terrorism units while enhancing penalties for money laundering. A key feature of the Patriot Act is Customer Identification Programs (CIPs), also referred to as Know Your Customer (KYC), which mandates institutions to verify their clients’ identities.
• FinCEN. Also known as the Financial Crimes Enforcement Network, is part of the US Treasury Department. It gathers and studies financial transaction data to fight against money laundering, terrorist financing, and other financial crimes. FinCEN also sets rules on customer due diligence that financial institutions must follow and strengthens regulations from the BSA.

These are the five stages, or pillars, of anti-money laundering compliance:

1. Appoint a compliance officer. They are responsible for assessing policies and drafting new ones to ensure that the company is AML-compliant.
2. Develop internal policies. Create policies to monitor suspicious activity and report data to agencies like FinCEN.
3. Implement employee training. Update staff with the latest AML trends, reporting procedures, and other relevant information.
4. Conduct independent testing and audits. Regularly assess and audit the company’s AML compliance processes.
5. Perform risk assessments. Evaluate customers and their transactions for potential risk using implemented internal AML processes.