Managing financial crime presents a complex challenge for financial institutions. Due to its covert nature, the full scope of money laundering is difficult to truly know. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2-5% of global GDP (up to $2 trillion in US dollars) is laundered every year.
As financial crime becomes more sophisticated and regulations grow tighter, businesses must prioritise robust anti money laundering (AML) measures. Industries like banking, fintech and financial services need strong AML processes to protect themselves from fraud, penalties and legal risks.
We explore how your business can strengthen its AML compliance and stay ahead in this ever-evolving landscape.
Why strong AML compliance matters
Money laundering is often the lifeblood of illegal activities, helping criminals hide illicit funds and finance crimes. Robust AML compliance helps businesses ensure that they don’t unwittingly facilitate crime. AML programmes detect and report suspicious activity, allowing organisations to safeguard their assets, protect their reputation and avoid significant financial penalties.
The cost of poor AML compliance
The consequences of non-compliance are becoming more severe as regulatory standards tighten. Failure to meet AML regulations can lead to hefty fines, reputational damage and restrictions on business operations. In 2024, the banking sector alone faced over $3.2 billion in fines due to non-compliance.
As the cost of non-compliance rises, businesses must protect themselves by implementing strong compliance measures.
Features of a strong AML programme
Creating a solid AML framework requires introducing measures that ensure the risk of money laundering is considered in your daily operations. An effective AML programme should have the following:
Know Your Customer (KYC) checks
The foundation of any AML programme is knowing who your customers are in the first place. KYC checks allow you to verify your customers’ identities before doing business with them. As part of a KYC check, the identity of your customers can be checked in a number of ways, including:
- high assurance verification of government-issued documents. This should include document authenticity checks alongside liveness detection and face matching checks.
- government and credit bureau data to cross-check Personally Identifiable Information (PII).
- highly secure digital identity wallets or schemes.
A risk-based approach to KYC helps identify high-risk individuals or transactions, allowing you to apply enhanced due diligence (EDD) where required. This advanced risk assessment process goes beyond standard due diligence, by identifying and mitigating potential financial crimes.
Transaction monitoring
Alongside identity checks, customers should always be screened against numerous international sanctions lists and watchlists, Politically Exposed Persons (PEP) databases and adverse media monitoring databases. These flag any customers with links to criminal or money laundering activities.
After the initial screening process, you should also put in place appropriate measures to continually monitor the status of your customers. Real-time monitoring is vital to spotting suspicious activities early. Ongoing database and watchlist screening will automatically flag deviations from normal transaction patterns or a change in customer status.
This allows you to identify suspicious behaviour as quickly as possible and investigate the highlighted issues.
Clear internal policies and procedures
Effective AML programmes rely on clear policies. This includes guidelines for all areas, from customer onboarding to ongoing monitoring. Policies should set out clear definitions of risk and contain actionable procedures to ensure compliance at every step.
Crucially, you should ensure your AML checks are in line with the relevant regulators for your jurisdictions. For example, the Financial Conduct Authority (FCA) is the financial regulatory body in the United Kingdom. The FCA generally requires customer identification to consist of 2 pieces of PII from 2 individual data sources. This is commonly referred to as a 2+2 level identity check.
Having well-defined responsibilities
For an AML program to be truly effective, it’s important to clearly define responsibilities within your business. HM Revenue and Customs (HMRC) advises that your controls should include providing senior managers with regular information on money laundering risks.
Additionally, training the relevant employees on their anti-money laundering duties is essential. Creating a culture of awareness and accountability ensures everyone knows their role in preventing financial crimes.
HMRC states that your business should have a ‘nominated officer’, who is the point of contact for any employees to report suspicious activity. If your business is larger or more complex, you should appoint a compliance officer. Additionally, you may require regional specialists to help you stay within the law across other jurisdictions.
Your nominated officer must stay alert to any suspicious activity in the business related to money laundering or terrorist financing and report it when needed. They are responsible for receiving, evaluating and submitting reports of suspicious activity to the National Crime Agency (NCA), and ensuring no illegal transactions continue to take place.
Regular monitoring
To maintain effective customer due diligence (CDD), your business should continuously assess customer risk and monitor transactions.
You should document and update your anti money laundering policies, controls and procedures. This will help you to make sure your compliance framework remains effective and up-to-date with evolving regulations. Where possible, you should also undertake regular audits and independent reviews.
How Yoti can help you strengthen your AML procedures
Our customisable identity verification solution can help your business to prevent fraud and comply with AML regulations. We’re able to accurately verify identity documents from over 200 countries and territories and screen information against thousands of global watchlists and sanctions lists.
The verification process is made up of a combination of robust data sources, automated technology, human oversight and reusable digital ID capabilities. Together, they ensure the highest completion rates, allowing your genuine customers to pass smoothly through the KYC process whilst helping you to screen high-risk individuals. By automating ongoing checks and getting alerts about changes in risk status in real time, your compliance team can focus on genuine risks rather than on false alarms.
The AI behind our technology can process massive amounts of transaction data to identify suspicious patterns and reduce false positives. Over time, the system repeatedly learns from past cases for ongoing improvement. This allows it to continually improve its ability to detect emerging risks and evolving criminal tactics.
Our solutions can be seamlessly integrated with our document scanning and verification software development kit (SDK). Alternatively, you can get set up on our no-code portal within minutes. Our solution is also easy to use, having achieved WCAG 2.2 Level AA requirements – the global benchmarking standard for accessibility.
Building a robust AML programme
A strong AML program is essential for preventing financial crimes, ensuring compliance and protecting your reputation. Adopting the right strategies can reduce the risks associated with non-compliance and create a secure, fraud-resistant environment.
If you’d like to know more about how to improve your AML compliance, please get in touch.
