Related Terms
DEFINITION
AML (Anti-Money Laundering)
AML refers to the laws, regulations and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income and to detect and report suspicious transactions to authorities. In practice, this means implementing proper KYC/KYB frameworks and a risk-based system, monitoring suspicious activities, performing background checks on customers, and denying services to threat actors.
Along with Combating the Financing of Terrorism, AML makes up the foundation for compliance that financial institutions must adhere to.
Synonyms
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Acronyms
AML
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Synonyms
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Acronyms
AML
Examples
In order to stay compliant with AML and CFT regulations, a financial institution needs to implement and perform KYC/KYB during onboarding as well as throughout a customer’s lifecycle. For example, if a person wants to open a new account, the bank has to:
– Identify them
– Verify their identity
– Perform background checks to see whether they’re a known criminal, are under sanctions, are a Politically Exposed Person, etc.
– Determine their risk level
Depending on their risk level, the bank will require more or less additional information and apply appropriate monitoring thresholds. They will then monitor the new customer, reviewing their account regularly as well as whenever they exhibit suspicious behaviour. Similar principles apply to legal entities with the addition of establishing the ownership structure of the business.
FAQ
What are the key elements of an effective AML program?
An AML program should include KYC procedures, risk assessment, transaction monitoring, suspicious activity reporting, and ongoing training.
How do AML regulations vary across jurisdictions?
While there are global standards like FATF recommendations, specific AML rules and reporting requirements can differ between countries.
What role does technology play in AML compliance?
RegTech solutions can automate transaction monitoring, risk scoring, and reporting to identify suspicious activities more effectively.
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worldwide trust Atfinity to drive their digital transformation.
Book your demo today and see why leading financial institutions worldwide trust Atfinity to drive their digital transformation.