Financial Crime World

Anti-Money Laundering (AML) Requirements for Financial Institutions

Financial institutions such as banks play a crucial role in preventing money laundering activities. To ensure compliance with regulatory requirements, banks must implement various measures to identify, monitor, and report suspicious transactions.

Key AML Requirements

1. Customer Identification Programs/Know Your Customer (KYC)

  • Banks must verify the identity of new clients and understand the nature of their activity
  • This process helps prevent money laundering by ensuring that customers are legitimate and not involved in illicit activities

2. Large Transaction Reporting

  • Banks must file a regulatory report for transactions above a certain threshold made by a single customer during a business day
  • This reporting requirement helps track large transactions and identify potential money laundering activities

3. Monitoring and Reporting Suspicious Activities

  • Regulatory agencies publish AML guidelines about behavior that banks should monitor, such as unusual cash deposits or withdrawals
  • Banks must report suspicious activities to regulatory agencies, who can take further action if necessary

4. Sanctions Compliance

  • Banks must check customers against lists of sanctioned individuals, companies, institutions, and countries
  • This helps prevent financing of terrorism and other illicit activities

5. Customer Due Diligence

  • Customer due diligence is an ongoing process to assess the risk posed by each client
  • It involves detecting common money laundering strategies and taking necessary actions to prevent them

6. AML Holding Periods

  • Banks implement holding periods to slow down the process of moving funds
  • This allows more time for risk assessments and helps prevent money laundering activities

7. AML Transaction Monitoring Software

  • Large banks use software to monitor transactions on a real-time basis
  • The software flags high-risk transactions, which are then reviewed by bank officials to determine if further action is necessary

Online Identity Verification: The Starting Point for AML Compliance

Online identity verification is the first step in ensuring AML compliance. It ensures that new customers are real, legitimate, and not subject to any sanctions. By verifying customer identities online, banks can reduce the risk of money laundering activities and maintain a secure financial system.