Anti-money laundering (AML) regulations are the laws made to eliminate money laundering from the global financial infrastructure. Regulatory authorities implement these laws carrying national or international scope. The major components of AML are mentioned below:
- The reporting entity must perform AML screening on the customers either individual or business before onboarding them.
- The reporting entity must maintain a record of the customers
- Report any unusual activity or transaction performed by customers
- Maintaining a compliance department to align the company’s operations with the AML regulations
The reporting entities list of AML regulations is also very long. Businesses of all types and sizes are liable for AML compliance. Businesses have the liberty to practice manual or automated AML screening on their prospects. Hence most of them are using this liberty and share some of their burdens by outsourcing AML/KYC screening solutions as per their compliance needs.
Common reporting entities as per globally prevailing AML laws and KYC regulations are listed below:
- Financial institutions
- Brokerage houses
- Stock exchanges
- Non-profit organizations
- Fintech businesses
- Online payment solutions
- IT industry
- Virtual currencies
Cryptocurrency platforms are the trending thing right now. Based on the blockchain virtual currencies are a household term. They have a global clientele and the news of Facebook’s Libra launch has raised a storm in the teacup. The regulatory authorities are working on implementing more stringent regulations on cryptocurrencies. The increasing global usage of cryptocurrencies is also exploited by criminals. So it is important for these platforms to perform at least basic AML screening on their customers.
- Art and precious metal dealers
FATF issued the recommendations for art and precious metals businesses in 2019. The new regulations recommended the member states to implement AML/KYC screening obligations on these businesses. These businesses are a common front for money laundering and terrorist financing across the globe. It is quite easy to launder money through these businesses across borders due to a lack of regulatory scrutiny. The criminals might miss the watchdogs but the business used for money laundering is held responsible for criminal negligence.
- Legal professionals
Legal Sector has a very diverse clientele. They have individuals and businesses equally in their client base. FATF’s new recommendations suggest that legal professionals must perform AML screening on their customers and on the UBOs of businesses they serve. AML screening is required to be performed just like financial institutions.
Performing AML screening will help businesses gain useful insights about their prospects and will help them onboard secure entities as their customers.
- Gaming platforms
Gaming and gambling platforms now involve virtual assets bought and traded using fiat or virtual currencies. These virtual assets are used for money laundering. Also, underage players are commonly exploited by professional players. That is why the Uk firms paid £19.6 million in fines due to a lack of AML compliance. These fines could cause financial distress for the business. So it is crucial for the gaming/gambling platforms to practice AML/KYC screening on their prospects.
- Fintech businesses
Businesses in the Fintech industry are a new venture in the business world and till now they’re quite successful in giving a tough time to conventional financial institutions. Fintech solutions are gaining global acclaim but they need to perform due diligence on their customers to reduce the risk of financial fraud. It will help the fintech businesses retain hard-earned growth. Lack of due diligence measures is increasing the usage of Fintech as a medium of money laundering.
To wrap up, the above-mentioned businesses are just a few entities that need to perform efficient AML on their customers. But there are plenty more, because crime is everywhere and criminals are always in search of new ways to launder money or finance terrorist organizations. Also, regulatory compliance helps businesses achieve many other benefits. It provides detailed insight into the customer’s background that can be used to draft efficient risk prevention strategies. It helps in onboarding reliable clientele that improves the market value of a company.