Anti Money Laundering (AML)

What is anti money laundering (AML)?

Anti money laundering (AML)  is a set of rules that companies use to avoid doing business with businesses or persons that may be involved in money laundering activities. AML is usually part of the broader governance, risks, and compliance (GRC) strategy that companies implement to comply with laws and regulations that impact all their departments, from accounting and human resources to sales, procurement, and manufacturing.

While money laundering can harm the finance and accounting department, it can also negatively impact the company's reputation, which may hurt its sales or relationships with partners.

Anti Money Laundering (AML) Software

Software, die anti money laundering (aml) als Funktion oder Begriff erwähnt.

Fraud.net

Types of anti money laundering (AML)

Depending on what AML is being used for, there are two categories of AML software.

• Know your customer (KYC): KYC focuses on the company's customers to ensure they are not involved in anti-money laundering activities.
• Know your business (KYB): KYB refers to all the businesses a company works with, including customers, partners, and suppliers.

Benefits of using anti money laundering (AML) for business

Businesses use AML to determine if the companies they work with are involved in money laundering activities. Some of the benefits are: 

• Curb financial losses: Companies can prevent financial losses caused by compromised businesses that may not pay for what they bought or return the money they borrowed.
• Comply with relevant regulations: AML can help businesses comply with regulations for AML to avoid fines and potential lawsuits.
• Protect company reputation: AML can help protect the reputation of the company from damages that may be incurred by working with corrupt or terrorist organizations.
• Streamline AML processes: Businesses can streamline processes across multiple accounting, sales, and compliance departments.

Basic elements of anti money laundering (AML)

A robust AML strategy that efficiently protects a company against money laundering should include the following elements:

• Know your customer (KYC): KYC helps companies gather information about their customers to determine if they are affiliated with corrupt governments or terrorist organizations.
• Suspicious person databases: Also known as watch lists, these databases contain the name of people and companies that are known to engage in money laundering, either directly or on behalf of other organizations.
• A repository of rules and regulations: A central repository of laws and regulations for AML helps companies keep track of compliance across multiple locations and legal jurisdictions.
• Suspicious transactions reporting: Even when individuals or organizations don't seem suspicious, they may perform transactions related to money laundering. It is therefore critical for companies to identify them and act accordingly.

Best practices for anti money laundering (AML)

AML is most effective when used proactively to prevent issues rather than trying to resolve problems after they occur. To be proactive, companies can use the following best practices for AML:

• Understand AML regulations: It is crucial to identify the local, regional, and global AML regulations that apply to a company to avoid penalties and potential lawsuits.
• Define proper workflows: Defining workflows to review, approve or reject suspicious transactions promptly before they negatively impact the company's operations is essential.
• Customize reporting: Users can customize reporting and alerts to ensure that all concerned parties are aware of potential fraudulent transitions in real time.
• Integrate with other relevant software: Integrating AML software with GRC platforms and accounting systems can help all teams can share transactional data.

AML vs. KYC and KYB

AML may be confused with KYC and KYB, but the latter are components of the former. Companies may choose only to use KYC or KYB when their AML compliance needs are basic and don't require advanced functionality. On the other hand, large multinational corporations and financial institutions require most or all AML features since they are more likely to be exposed to money laundering fraud.