Conducting an AML check: tools and processes

Compliance teams form a critical function at financial institutions and other regulated firms, tasked with undertaking AML checks to identify illicit activities and financial crime in order to safeguard businesses from financial crime and mitigate risk. 

In this article, you’ll find a handy anti-money laundering compliance checklist of the key areas, summarising good practices; helping firms to meet compliance requirements and instil confidence in operations.

What is an AML check?

An AML check refers to the process of verifying the identity of individuals or entities to prevent money laundering, terrorist financing, and other financial crimes. The purpose of an AML check is to ensure that businesses comply with regulatory requirements and maintain the integrity of the financial system.

During an AML check, financial institutions, such as banks, payment processors, and other regulated entities obligated to follow AML regulations, conduct due diligence on their customers. The process typically involves collecting information and documentation to establish the identity of customers and assessing the potential risk they pose in terms of money laundering or illicit activities.

The importance of AML checks for compliance

Conducting an AML check forms a critical foundation in the detection and prevention of money laundering, fraud and terrorist financing, notwithstanding the impact that non-compliance can have on firms. A poor AML process can lead to catastrophic effects,  ranging from fines and bringing a company into disrepute, to criminal charges and even jail time. In 2022, banks and other financial institutions were fined almost £4bn for failings in anti-money laundering compliance. 

1. Develop and maintain a robust AML check programme:

  • Establish a clear and comprehensive AML check policy
  • Designate a dedicated compliance officer responsible for AML efforts
  • Implement internal controls and procedures to detect and prevent money laundering activities
  • Conduct periodic risk assessments to identify and manage AML risks 

2. Customer due diligence (CDD) and Know Your Customer (KYC) procedures: 

  • Conduct thorough customer due diligence before establishing a business relationship
  • Verify the identity of customers using reliable and independent sources 
  • Monitor and update customer information regularly
  • Implement enhanced due diligence (EDD) measures for high-risk customers or transactions

3. Suspicious activity monitoring and reporting: 

  • Implement robust systems for monitoring and detecting suspicious activity 
  • Establish clear guidelines for identifying and reporting suspicious activities
  • Train employees on recognising red flags and reporting obligations
  • Maintain proper documentation of suspicious activity reports (SARs) submitted to the relevant authorities

4. Staff training and awareness: 

  • Provide regular AML training to employees to ensure they understand their obligations 
  • Keep employees informed about the latest AML developments and regulatory updates 
  • Foster a culture of compliance and encourage employees to report any concerns or suspicions 

5. Compliance with legal and regulatory requirements: 

  • Stay up to date with the Money Laundering Regulations and other legislation that is relevant to your business
  • Comply with customer screening requirements, including politically exposed persons (PEPs) and sanctions lists 
  • Establish a process to assess and manage risks associated with correspondent banking relationships 
  • Retain records for at least five years after the end of a business relationship or a transaction (such as a house sale) has completed

6. Conduct periodic independent audits: 

  • Enlist an independent auditor to assess the effectiveness of your AML check process 
  • Review audit findings and implement necessary improvements

7. Collaboration with regulatory authorities

  • Cooperate with regulatory bodies and provide requested information promptly 
  • Stay informed about the guidance issued by the Financial Conduct Authority (FCA) and other relevant authorities

Download our checklist as a PDF to keep on hand when conducting your next AML check.

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