The banking sector is always under the radar of regulatory authorities. Off late, money laundering has attracted a lot of attention. With the growing checks in AML in banking and financial-crimes compliance (FCC), banks now earmark significant investments to amplify their defense lines. 

However, money laundering and the concealment of money obtained from illegal sources continue to pose a significant risk. According to the US Department of the Treasury, money laundering is an attempt to disguise the proceeds, sources or nature of illicit activities through financial transactions by criminals including terrorist organizations. Money laundering is a criminal activity. As per Financial Action Task Force, popularly known as FATF, this process is crucial as it helps the criminals to relish the profits without hampering the source.

AML In Banking: Understanding The Connection And Importance  

The money channeled into the financial system using the banking infrastructure often follows a circuitous route. For criminals, money laundering through the banking system offers an opportunity to park their ill-gotten capital in a safe haven and at the same time ward off any suspicion. This is where anti-money laundering comes in. 

Anti-money laundering or AML refers to activities and measures taken to prevent money laundering and complying with regulations by instituting policies, procedures and technologies.

The rapid advancement in technologies has increased the channels of banking transactions. It has also made accessing funds speedy and easy. The banking industry has a typical nature, with segments such as retail, commercial, and correspondent. For money laundering, this widespread banking network, and diversity in products and services, offer lucrative ways of converting cash into financial instruments and making high-value transactions. The placement stage of money laundering often happens at this juncture in the retail banking segment. AML in banking becomes challenging as identification of such transactions among thousands of daily transactions is difficult.  

Impersonation funds and “mule accounts” are also used to launder money using the banking system. Other than this, trade-based money laundering, using actual trading  transactions to disguise the profits from illegal activities has also permeated into banking. 

Why is AML in banking important? 

The banks have faced the wrath of regulators for a long time. AML in banking is a tough task. Adherence to the anti-money laundering laws is mandatory, especially after the FATF came into force. The role of safeguarding the interest of the bank has been vested into the compliance function, primarily. Banks need to identify the AML risks and meet their obligations. 

  1. The AML process of a bank is crucial for meeting regulatory reporting and auditory obligations. 
  2. It is important for maintaining the financial and reputational standing. 
  3. The fines for leniency in AML and laxity in compliance run in millions and can in some cases have harsh implications that may include the closure of business operations. 
  4. Reputational damages have a long-term bearing on the image of the institution.  

AML strategies in banking: key processes employed

Tackling money laundering and financial crimes for years now, banks have also amped up their screening procedures. 

They include measures  like i) Know Your Customers (including beneficial owners), ii) performing timely and regular account reviews, and iii) monitoring and reporting any anomalies and suspicious transactions.

Other than this, banks have additional checks such as:

  1. Customer due diligence
  2. Customer risk assessment
  3. Verification of wire transfers and transaction screening
  4. In-house policies, procedures, and training
  5. Record keeping

How to stay compliant with AML in banking?

If banks proactively invest in a strategic approach to stay AML compliant versus taking a reactive one, they can significantly reduce their risk.  

  1. KYC

The first thing banks can start with is evaluating the complete KYC and AML process, from beginning to end. When banks start a relationship with a customer, how the process of onboarding and verification takes place often form the foundation of the AML methods.  

Screening of high-value and new customers across the database to identify any links to PEP (politically exposed persons), criminals, or terrorist groups, is an important step in fortifying defense. 

To find out accurately the anomalies or suspicious activities, connecting all customer information with KYC and AML datasets should be considered. 

  1. Assessing banking products and services

Assessment of the bank’s products and services by monitoring the usage and consumption patterns on a regular basis to prevent any misuse. 

  1. Training and hiring compliance specialists

Professionals with experience in the compliance function and AML bring a wealth of knowledge and techniques to perform anti-money laundering checks diligently. 

  1. Employing governance and bank-wide controls

Banks can deploy a control framework for supervising the global AML policies and processes and embarking on testing the controls periodically. 

Tech and AML: Leveraging technology to combat risks

Using technology to automate and apply necessary checks can cut the manual errors and help to prevent money laundering in tracks. 

  • Deploy advanced analytics solutions for due diligence 

     Banks can use analytics solutions to perform due diligence and undertake a risk-based strategy for alerts and stay agile by reducing the response time to evolving risks.

  • Automate KYC

A part of the process including onboarding of customers and rating new customers and old as per customer events as per the risk assessment can help to mitigate money laundering threats. 

  • Monitoring and review

Continuous monitoring is challenging. Automating the review process can cut the time taken to perform a regular review and also stay compliant at the same time.

  • Find synthetic and identity theft

Address the issue of identity theft and synthetic identities with advanced technologies such as AI and ML. It may also help to spot complex hidden patterns and relationships identifying malicious activity in real time.

How can HyperVerge aid banks in AML?

HyperVerge deploys its very own AI technology to fight money laundering. Banks can rely on a high-ranking global AI solution, which has been recognized by NIST and renowned agencies worldwide for its capabilities. HyperVerge offers one of the fastest KYC/AML checks and online identity verification globally.  

  • Banks can customize their own workflow from different HyperVerge modules
  • Edit and change the workflow in a jiffy with a few codes
  • Integrate and go live in an hour


Anti-money laundering steps in banking make up a crucial must have for successful operations. With the sophistication of money laundering activities increasing every day, it becomes critical to supplement human efforts with the right technology and prevent being prey to bank money laundering. 


Is there a need for third-party AML solutions when banks have the compliance function?

Yes, the third-party solutions from specialist fintech companies today are advanced tempered with AI and ML for higher accuracy and intelligence.

Do these solutions help in AML compliance?

Yes, the regular record keeping, reporting, auditing, automated KYC checks, stress testing, and other such activities can be performed periodically.

Do the AML solutions hamper the working of other processes?

No, not really. It largely depends on the vendor and solution employed. Advanced AI-based technologies have proven to cut time and run seamlessly with other banking processes.