In the financial world, money laundering is a pandemic that fractures not only the economic development but also the social development of a nation. Each year, the world loses at least 2 to 5 per cent of GDP due to money laundering — funds that could have been otherwise used for government projects which could potentially uplift the quality of life or economic status of a country. On top of that, laundered money obtained from unlawful activities could be financing terrorism.
Finance institutions, as well as financial watchdogs, have safeguard systems in place to prevent such financial crimes. Nonetheless, money laundering remains rampant in the financial world. Why? This is a result of deficiencies in anti-money laundering (AML) legal structures and implementation on the part of the government; relaxed or, simply, poor AML compliance procedures amongst financial houses.
The risks of poor AML compliance
Non-compliance with AML regulations and poor implementation of internal AML and KYC policies can spell trouble for financial institutions. A classic example of that is the Wachovia scandal—once one of the biggest banks in the United States, Wachovia’s reputation is now almost always a subject of money laundering case studies (we discuss more about the Wachovia scandal here).
Once confirmed to have been transacting with money launderers—whether knowingly or unknowingly—a financial institution’s reputation may be stained and associated with the crime. It could lead to clients terminating their business relationship with the institution, which, ultimately, leads to financial loss.
Additionally, because money laundering is often linked to terrorist financing, institutions that have helped facilitate the transfer of these funds may face public and government scrutiny and answer to legal responsibilities. Potential imposition of fines and penalties may mean loss of profit as well.
Internationally, money laundering is considered a criminal offence. That is why the government works closely with financial institutions to prevent, trace and uncover any money laundering activities occurring within a jurisdiction to make sure that the business and the country is not being used as a site for criminal proceeds transactions.
If an institution has been identified as a facilitator of a money-laundering scheme, it could answer to the court concerning the state’s AML laws. For example, under the AML Directive 6 (AMLD 6) of the European Union, it is illegal to abet, aid or incite money laundering activities.
Intensifying your AML programs
AML compliance is a financial institution’s pursuit of full transparency to ensure—from the start point of the onboarding process—that the client is not involved in any unlawful businesses or activities.
Bolder Group, an AML solutions provider, has designed its own process and procedure for implementing AML protocols for its roster of clients. This starts with a risk-based approach to carrying out Know Your Customer (KYC), Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) measures. These processes allow for an effective assessment of client risks—high, medium or low; as well as verification if a customer is a politically exposed person (or related thereto), a financial intermediary or a person whose name appears on an international sanctions list.
These AML programs also look into the identity of the ultimate beneficial owner (UBO), the customer’s transaction patterns and financial intentions and their true source of wealth.
Your AML programs, however, should not end upon the finalisation of the onboarding. Instead, it should be an ongoing process to confirm that the customer you are providing services to is not receiving, sending or transacting with illicit cash. Consequently, financial institutions should also have continued AML checks and a suspicious transaction notification protocol in place.
It’s equally important to have recurring AML training amongst management, staff and especially compliance officers, as national and international AML regulations are regularly being amended. In relation to that, the institution’s internal AML policies should be maintained and updated as new laws are passed.
AML compliance, the Bolder way
Staying compliant is a major challenge and one of the least understood risk areas for many companies. The demand for compliance requirements in today’s rapidly evolving regulatory environment means that firms are increasingly looking at faster and more cost-efficient methods to comply and also reduce the burden of KYC requirements.
Bolder offers a full range of compliance services, from the screening of UBOs to full regulatory reporting in all major jurisdictions around the world. We can ensure full compliance with local legislation and timely filing to local regulatory bodies. Compliance and KYC services are core components of the overall Bolder due diligence workflow process for various types of clients: corporates, private, investment vehicles, asset managers, brokers, art dealers, realtors, companies active in the crypto industry. To provide an efficient approach to long-term KYC sustainability, Bolder offers a tailored approach to meet the individual needs of our clients.
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