Anti-money laundering (AML) refers to a set of laws, regulations, and procedures that financial institutions and other regulated entities are required to follow in order to prevent, detect, and report money laundering activities. Money laundering is the process of disguising the proceeds of illegal activities as legitimate funds. It involves converting "dirty" money, which is obtained through illegal means, into "clean" money, which appears to have been obtained through legal means. The main purpose of AML laws is to prevent the use of the financial system for the purpose of money laundering and financing terrorism. These laws are designed to disrupt the activities of criminal organizations, terrorist groups, and other illicit actors who rely on the financial system to facilitate their illegal activities.
Who does AML regulations apply to?
AML regulations apply to a wide range of financial institutions and other regulated entities, including banks, credit unions, securities firms, insurance companies, money service businesses, casinos, and others. These entities are required to implement internal controls such as customer identification and verification procedures to detect and report suspicious activity. Financial institutions and other regulated entities are also required to establish and maintain an effective AML program, which includes the development and implementation of policies, procedures, and internal controls to detect and report money laundering and terrorist financing activities. This includes the establishment of a compliance officer or team responsible for overseeing the AML program and ensuring compliance with AML laws and regulations.
Who regulates AML?
There are a number of international organizations that play a key role in the fight against money laundering and terrorist financing. These include the Financial Action Task Force (FATF), an intergovernmental organization that develops and promotes international standards for combating money laundering and terrorist financing, and the Egmont Group, an international network of financial intelligence units. In most local jurisdictions, the central bank or financial regulator is responsible for supervising and enforcing AML regulations. In Singapore, the Monetary Authority of Singapore (MAS) regulates financial institutions and payment providers under the Payment Services Act. MAS has published guidelines on the Prevention of Money Laundering and Countering the Financing of Terrorism for payment services.
AML laws and regulations have evolved significantly over the years in response to changing threats and trends in money laundering and terrorist financing. The adoption of new technologies, such as digital currencies and virtual assets, has also led to the development of new AML regulations to address the potential risks associated with these technologies. Overall, the goal of AML laws and regulations is to create a more transparent and secure financial system that is less vulnerable to abuse by illicit actors. By implementing effective AML programs and procedures, financial institutions and other regulated entities can play a key role in disrupting the activities of criminal organizations and terrorist groups and protecting the integrity of the financial system.
Automate Your AML Screening
AML laws and regulations require financial institutions and other regulated entities to implement customer due diligence (CDD) measures. CDD is a process that involves obtaining information about customers, including their identity and financial activity, in order to assess the risks associated with doing business with them. This includes verifying the identity of customers, understanding the nature of their business and financial transactions, and monitoring their activity for any suspicious activity. This is often an intensive process for most companies.
Fortunately, there are tools available to help companies comply with regulatory requirements while automating the entire process. OneHypernet's all-in-one compliance solution has a robust case management system with ongoing monitoring, screened against a comprehensive database of global sanctions and watchlists data. For more information, book a demo with one of our experts today.