Since the majority of criminals and terrorists rely heavily on a cash flow of laundered money for their illegal activities, having the appropriate AML checks in place has broader crime-reducing implications.
Most countries have their own set of AML regulations guided by the FATF Recommendations. The UK is guided by the 2017 Money Laundering Regulations and subsequent amendments. Businesses regulated by money laundering laws must perform AML checks as part of customer due diligence. This step is crucial in identifying and mitigating the risk of money laundering.
Key tools in this process include:
- Identity Verification: Confirming your customer is who they say they are
- Customer Screening: Verifying your customer doesn’t appear on global watchlists or is high-risk, such as a PEP (Politically Exposed Person).
- Ultimate Beneficial Owners identification: Verifying all parties that are set to benefit from the transaction such other individuals listed on a title deed.
- Financial due diligence: Confirming the source of funds are from legitimate and explainable sources
- Risk assessments: Determining the level of risk the customer and what measures to take to mitigate the risk of money laundering
Establishing robust internal controls and monitoring systems is essential for guiding and informing the nature of AML checks. Moreover, businesses should document their AML procedures in a policy statement and maintain meticulous records for at least five years to demonstrate their compliance.
AML checks don’t just apply to individuals though, they also apply to business relationships. When working with new business partners it is essential that you establish any Ultimate Beneficial Owners (UBOs) and screen them for appropriate risks.
