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Aug 25, 2022

AML (Anti Money Laundering) compliance & requirements

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AML (Anti Money Laundering) compliance & requirements

The AML Directives or Anti-Money Laundering Regulations, also known as Prevention of Money Laundering, are closely related to the KYC (Know Your Customer) process.

It is important to understand the magnitude of the risks associated with money laundering because the criminal practices associated with it are a considerable offence for society, companies and individuals. Therefore, AML KYC compliance with the practices of prevention of money laundering is mandatory for all kinds of business and organizations and is strictly regulated in every state, country and region.

AML and KYC are two closely related concepts and should be understood as part of the identification process. This makes the relationship between the KYC and AML processes essential to prevent money laundering in contractual relationships and transactions and in the AML KYC client onboarding process.

Download here for free this complete guide on KYC AML compliance.

AML MEANING: WHAT IS AML (ANTI MONEY LAUNDERING) AND HOW IT WORKS?

What’s AML? The AML meaning is an acronym for the term Anti Money Laundering. It is mainly used in the financial, legal and compliance sectors to develop the standard controls that companies and organizations must carry out in order to avoid, identify and report suspicious behaviours of money laundering that can happen while carrying out their activity.

Anti Money Laundering or AML compliance practices focus on performing anti money laundering procedures that discourage and prevent potential violators from engaging in money laundering fraud or crime. In this way, criminals cannot hide the illicit origin of money in any type of transaction.

This is especially noticeable in the context of online and remote services and products. On many occasions, services and/or products are purchased and/or contracted through the Internet, which payment is made with money from sources, companies or individuals of dubious legitimacy.

However, if the processes follow the anti money laundering guidelines established by the AML and KYC policies, this risk is mitigated until it becomes non-existent.

The AML KYC requirements established by the AML compliance regulations on Money Laundering Prevention not only help businesses not to get involved in possible frauds and crimes but also their assessment improves, optimizes and automates their usual processes.

ANTI-MONEY LAUNDERING REGULATIONS AND LEGAL FRAMEWORK

AML practices have been legislated widely in recent years both in Europe and worldwide and are a mandatory legal requirement for businesses, organizations and institutions so that their activities are allowed. Compliance with AML standards is not an option, but a legal obligation, especially in the financial, FinTech and banking sectors.

The anti money laundering regulations are responsible for guiding the regulated sectors on how to operate and proceed online. Compliance and legal departments or RegTech partner business are responsible for ensuring that all company processes meet the requirements requested by the AML regulations of each state and country.

AML Directive Fifth

The Anti Money Laundering Directive #5, which entered into force on January 10, 2020, requires a wide range of organizations, highlighting those in the financial sector, to comply with a series of standards in their processes.

This European anti money laundering Directive expands the list of subjects appointed to carry out AML compliance controls in their processes. Likewise, the standard gives companies the possibility of contracting, selling and remotely onboarding users in a totally online, safe, optimized and legally binding way.

Due to the anti money laundering obligations’ timeliness and characteristics, it is the regulatory framework of reference for the rest of worldwide legislation on the prevention of money laundering in any state on any continent. A company, business or institution in Asia or America will comply with the AML regulations of their state and countries taking this regulation as a reference.

Read here how the #5 AML policy created a unique single EU market.

AML Directive Sixth

The Sixth Version of the AML compliance policy is aimed at removing loopholes in the domestic legislation of member states by harmonizing the definition of the AML compliance meaning across the EU. For the first time in an anti money laundering AML Directive, cybercrime has been listed as a predicate offence.

These new AML compliance standards advance what is already established in the previous AML regulations and imply an important and decisive development in certain areas of the law. It focuses on hardening the jurisdiction and penalties of companies that do not comply with the anti money laundering checks required, the evolution of corporate responsibility, and establishes the points to consider aggression.

Read here the 6 key changes of the AML Directive #6.

AML CHECKS, KYC (KNOW YOUR CUSTOMER) AND RELATED CONCEPTS

The AML Anti Money Laundering checks is a set of procedures and ways of acting that directly influences the usual processes of, for example, financial, banking, real estate, insurance or telecommunications companies.

Among others, the following activities are affected by the AML requirements:

  • KYC (Know Your Customer): Anti money laundering checks solutions are accompanied by the KYC process. A company or institution is obligated to verify the identity of a client before providing services and/or products. This dual KYC/AML procedure is essential to carry out the controls that allow knowing whether a subject has committed, is committing or intends to commit a money laundering crime by establishing a business relationship with him.
  • eKYC standards: Just linking to the previous point, the electronic Know Your Customer process is nothing more than the digital transposition of the KYC process, performed remotely, and must also be AML compliant.
  • KYB (Know Your Business): On the same basis as the AML/KYC process, KYB procedures focus on identifying a business, organization or institution rather than a consumer, customer or user, with its own differences and distinctions, but also must be compliant and pass all AML checks.
  • Due Diligence: The audit and investigation process prior to the acquisition, purchase or sale of a business, or the performance of any important negotiation, requires the inclusion of Anti Money Laundering compliance checks. In this way, potential risks are evaluated and the goodwill of the parties in the negotiation is corroborated.

KYC AND AML COMPLIANCE: REGTECH PARTNERS

AML/KYC Compliance processes present two main challenges: their conception and understanding and their application in the normal activities of the company or institution. That is why committing its implementation and management to specialized experts is the best way to ensure that we comply with all AML policy requirements and take full advantage of its assets and benefits.

Electronic IDentification, eID, is a RegTech and GovTech qualified partner that accompanies thousands of businesses and financial institutions in their needs related to the prevention of money laundering with AML guidance and its KYC AML solutions.

It is an eTrust Service Provider and compliant AML certification authority and, therefore, can issue a Qualified Electronic Certificate and Signature through a VideoID process. All in one single KYC AML process flow that performs all the needed AML checks.

All eID KYC AML solutions comply with guarantees with all Anti Money Laundering regulations anywhere in the world, including the new Directive AML procedures and eIDAS regulation. This not only involves adapting business processes to the mandatory regulations in each sector but optimizing and digitalising all KYC/AML processes with their anti money laundering software solutions to boost customer acquisition and reduce costs.

Request a free demo of our compliant Anti Money Laundering software solutions here.

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