By law, you are required to perform risk-based customer due diligence to prevent your business from being exploited by criminals for the purposes of money laundering.
These compliance standards are upheld by the following legislation:
Due to globalisation, financial crime is now an international issue. According to TechSprint, over $30bn will be laundered through the global financial system.
Therefore, an internationally led fight against money laundering is co-ordinated by some of the following:
International entity that sets anti-money laundering standards and counter-terrorist financing measures and recommendations on a global scale.
The 5th AMLD is to come into effect in January 2020.
The 5th directive will require you to examine the background and purpose of a wider range of transactions. It proposes extra EDD measures for business relationships and transactions with high-risk 3rd countries.
The 6th AMLD is to come into effect in June 2021.
Aims to tackle legal discrepancies in order to more effectively and cooperatively tackle money laundering. The aim is to create a harmonious definition of money laundering between the EU member states.
Regulates and aids the UK financial sector, setting compliance standards to combat financial crime such as money laundering and the funding of terrorism. In partnership with the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) to strengthen the UK’s anti-money laundering regime.
As a professional within the regulatory sector, you are obliged to upkeep rigorous anti-money laundering procedures concerning the above legislation.
We have condensed the most relevant anti-money laundering legislation and regulatory boards recommendations into 6 key components. These cover how you can successfully carry out your AML obligations.
Id verification is imperative for good AML practice. As the 5th EU Directive stipulates electronic identity validation methods are essentially mandatory to fully satisfy your AML obligations.
A PEP (Political Exposed Person) is thought of as a high-risk individual due to their status and potential risk of corruption. PEPs are individuals with prominent public functions such as senior politicians, senior civil servants, or people holding high military rank. Due to this risk, further action is required.
If your client is flagged as a PEP, you simply need to conduct enhanced due diligence such as monitoring the client’s financial transactions.
These screens are imperative to prevent your business from conducting any business or transactions with any person on the sanctions list.
Carrying out AML and KYC checks is only part of your money laundering obligations. You must also have a thorough policy in place which details your firm's AML policies and procedures. This policy must include but isn’t limited to the following:
It is a legal requirement that all staff undergoes anti-money laundering training and that this is recorded and on file. You must train employees on how to recognise suspicious activities and what to do in the event of suspicion.
AML compliance is a continuous process of verifying, monitoring and managing. The process does not stop after the client onboarding stage but rather carries on throughout the entirety of the client relationship.
For example, records of any AML check or ID verification need to be kept for a period of 5 years from the point of termination of a client relationship. High-frequency monitoring of the PEP & Sanctions list may be appropriate in certain cases.
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AML anti-money laundering compliance checklist