With the evolving landscape of financial crimes, compliance professionals play a pivotal role in ensuring that their organisations adhere to essential AML requirements detailed in legislation such as The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
What is AML compliance?
AML compliance typically involves a series of measures aimed at preventing and detecting illicit financial activities. Regulated firms play a pivotal role in maintaining the integrity of the financial system and must implement comprehensive customer due diligence measures, including the verification of customer identities and the monitoring of customer risk profiles. By conducting thorough checks and assessments, firms can identify any suspicious activities and take appropriate actions to mitigate risks.
In this article, we take a look at some of the essential AML requirements for regulated businesses.
Customer Due Diligence (CDD)
The cornerstone of AML compliance, Customer Due Diligence requires firms to conduct thorough background checks on their customers in order to understand their risk profile. Compliance professionals must ensure that their firms have robust procedures in place for identifying and verifying customer identities. Enhanced due diligence (EDD) should be applied to higher-risk customers, and ongoing monitoring is crucial to detect any unusual or suspicious activities.
Enhanced Due Diligence (EDD)
EDD allows regulated firms to identify and assess higher-risk customers, significant transactions or business relationships. By conducting a more thorough due diligence process, firms can tailor their risk management strategies to mitigate potential risks associated with money laundering, terrorist financing, or other financial crimes. This enables firms to adopt a risk-based approach, ensuring that the level of due diligence applied is proportionate to the risk associated with a specific client.
Conducting a risk assessment is a fundamental step in AML compliance. Regulated firms should develop a risk-based approach tailored to their specific business activities. This involves assessing the risk associated with customers, products, services, and geographic locations. Regularly reviewing and updating risk assessments ensures that compliance measures remain effective and proportionate.
Suspicious Activity Reporting (SAR)
Firms must establish and follow procedures for identifying and reporting suspicious activity to the National Crime Agency (NCA) promptly. As such, compliance professionals should ensure a robust record-keeping system is in place to make this process as simple as possible, ensuring that relevant documents are stored securely and are easily accessible for regulatory inspections.
Establish internal controls and policies
Establishing and enforcing robust internal controls and policies is crucial for ensuring compliance with AML regulations. Developing a thorough risk assessment procedure is vital to identify and mitigate potential money laundering and terrorist financing risks. Regular reviews and updates to policies are necessary to ensure firms are always ahead of and can adapt to changing regulations and emerging risks.
Ongoing training and development
Businesses should conduct regular training sessions for employees to educate staff about the latest regulations, risks, and procedures. This helps employees recognise and report suspicious activities effectively and actively contributes to building a culture of compliance within the organisation.
AML compliance is a dynamic and ever-evolving field, requiring continuous efforts from compliance professionals to safeguard their businesses against the risks of money laundering and other forms of financial crime.