A Comprehensive Anti-money Laundering Compliance Checklist

Money laundering is a financial crime involving converting illegal finances to legal by concealing the origin and identity of the source so it seems legitimate and can’t be tracked by the legal authorities. This criminal activity is performed to conceal money obtained through various illegal activities like establishing a cash-incentive business, surfing, ghost companies, drug […]

Table of contents

Money laundering is a financial crime involving converting illegal finances to legal by concealing the origin and identity of the source so it seems legitimate and can’t be tracked by the legal authorities.

This criminal activity is performed to conceal money obtained through various illegal activities like establishing a cash-incentive business, surfing, ghost companies, drug trafficking, arms trafficking, terrorism, and more. Money laundering not only affects the global economy but is a threat to humanity.

The estimated amount of money laundered globally is between 2% to 5% of the global GDP, which is approximately $800 billion to $2 trillion. This is a one-year estimate—actual numbers could be higher!

Importance of AML compliance

Since the 2008 financial crisis, the US government authorities have amplified enforcement of anti-money laundering regulations worldwide. Bank scandals like Danske Bank, which suffered a $2 billion AML compliance failure, further underscore the importance of AML compliance. As per SARs, the international bank HSBC was fined $85 million for not being able to maintain proper records as part of its AML measures.

The stricter the regulatory environment becomes, the more crucial it becomes for financial institutions to have robust compliance processes, technology, and tools that they keep upgrading from time to time. 

Local and government bodies work to ensure AML compliance and have formed strict anti-money laundering policies that all financial institutions and businesses involving huge financial transactions must comply with. For example, verification processes like KYC were introduced to prevent ghost transactions and track money laundering actions. 

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AML best practices checklist

It’s always better to trust the experts for AML compliance, and we bring you a comprehensive checklist that can help you improve your AML program. Read on to know more. 

anti-money laundering compliance checklist

1. Know Your Customer (KYC)

KYC and AML are two related but distinct concepts in the financial sector. KYC is primarily focused on verifying the identity of customers to ensure that they are who they claim to be and to mitigate risks related to fraud, identity theft, and financial crimes. This involves collecting and verifying customer information, such as identity documents and personal details, as part of the onboarding process.

2. AML risk assessment

AML risk assessment is the next major step that plays a crucial role in anti-money laundering and is a significant part of AML compliance. This assessment helps organizations and legal authorities understand the scope of money laundering or terrorist financing in any business or with any particular client. Companies and legal organizations create a risk indicators list that helps them check potential risks of money laundering and identify possible measures accordingly. 

3. Screening against PEP and sanctions list

Screening against Politically Exposed Persons (PEP) and checking the sanctions list is a part of customer KYC that is cross-checked by tallying data with databases and PEP lists provided by government agencies. This is a vital step in AML compliance that must be done in real-time to ensure authenticity.

The screening process must include verification of full name, date of birth, current financial sanctions and watchlists, age, and all possible ID documentation that can ensure that an individual does not have a history of high-risk transactions or is not involved in illicit activities.

If a client is identified as a PEP, the organization must conduct enhanced due diligence, including ongoing monitoring of the client’s financial transactions and performing screening and sanctions checks.

Ongoing transaction monitoring

Ongoing transaction monitoring regularly examines customers’ data and transactions. Banks have to ensure that all the compliance efforts are in line with the Bank Secrecy Act and ensure the complete safety of customers’ identities. 

Recordkeeping and reporting

Recordkeeping is the process of creating, organizing, and managing information or accounts of customers. Reporting is a legal obligation that involves reporting a specific type of information. Recordkeeping and reporting are crucial to the AML compliance checklist, and all financial institutions must ensure these fundamental building blocks of AML are followed with 100% compliance.

Employ a robust solution for AML monitoring

Investing in a well-developed AI solution for constant AML monitoring can be one of the best decisions as part of your compliance efforts. HyperVerge ONE is the ideal solution for seamless, compliant onboarding and activation that helps you with constant monitoring, easy scheduling, AML screening, risk assessments, and automatic alerts – ensuring smoother and easier compliance.

How to stay AML compliant with HyperVerge

Develop written internal policies

It is essential to have your firm’s AML policies documented to ensure the company’s AML policies and procedures are in place.

Central governing bodies like BSA and the Financial Crimes Enforcement Network (FinCEN) mandate that financial institutions have AML controls to prevent money laundering and terrorist financing. The AML policy must focus on different areas, including customer due diligence, nominated officers’ details, suspicious activity reports, KYC, risk assessment, reporting forms, and more.

Having policies in place is pivotal to adherence to the AML checklist and plays a notable role in avoiding terrorist financing. It is important to establish and maintain a formal policy defining minimum requirements and expectations for an effective compliance program.

Designate a chief compliance officer

A compliance officer is an expert responsible for doing almost everything from conducting risk assessments to providing guidance and ensuring compliance across the organization and at all levels. Their responsibilities and experience can be valuable to financial institutions and help them identify customer risk profiles and institutionalize the compliance program to establish an improved risk-based approach. 

Schedule an independent third-party review

Third-party assessments and reviews are paramount to monitor and test compliance efforts within an organization. Independent testing is a critical part of third-party reviews that helps to assess and mitigate risk and fosters proactive management for better risk management.

Train the staff and keep track of regulation changes

Trained staff and regimented internal reviews are essential for any financial institution for effective anti-money laundering compliance.

As financial criminals are developing sophisticated money laundering techniques, it is necessary to keep upskilling and training internal staff so they can help the compliance team keep a better check on non-compliance.

Simplify your compliance efforts

with HyperVerge’s KYC and AML integrations Get a Free Demo now!

Make your compliance process easy with automated AML solutions

Artificial Intelligence (AI) is improving and revolutionizing the world of AML regulations and empowering financial experts in strengthening the monitoring of payments and suspicious transactions.

HyperVerge’s AML software provides real-time AML screening and monitoring that help you to mitigate risk, secure and transform your money service businesses, empower your compliance teams, and protect your bottom line and reputation.

HyperVerge AML solutions is a trusted partner for AML compliance. Talk to us today! 

Helina Hilda

Helina Hilda

Content writer with a passion for technology and love for crafting content for HyperVerge

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