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The future of AML Compliance: Verification and Screening

Anti Money Laundering has evolved over the years as criminals use revolutionary means to launder illicit money. With the advent of technologies now AML checks are done through automated solutions.

When observing modern efforts to fight money laundering, it is important to witness the hurdles faced by financial institutions and regulatory authorities. The problem is with the synchronization between business procedures and Monterey Authorities’ directives. There are many aspects of AML compliance that need to be discussed. The rising money laundering efforts enhance the need for robust AML verification methods in the future.

AML Compliance in Future

The AML compliance program efficiency needs to be more enhanced to combat modern tactics of money laundering. The evolving anti-money laundering directives have increased focus on each transaction and customer.

The processing of AML compliance can be improvised by the following methods:

AML Integration

The basic stage of AML compliance is AML integration in which personal and financial data is collected and analyzed. AML integration is done for the prevention of illicit cash involvement. AML integration is the verification of the identity and background of the customer by performing Know Your Customer (KYC) verification of every onboarding customer. KYC verifies the identity of the customer and forms a separate data view for each individual that can be later used for Suspicious Activity Reporting (SAR) and future decision-making.

The separate data view for each customer is a significant part of an efficient AML compliance program. This increases the scanning and processing speed of AML screening software. The decision-making for a risk-based approach becomes more seasoned and sophisticated. The resources that were spent on the investigation of money laundering can be reduced by AML integration.

But the problem with AML integration is the diversity of data sources that make it difficult for organizations to form a separate data view of customers. Furthermore, financial institutions are required to comply with AML directives. Hence, financial institutions are obliged to prepare AML policies that can comply with AML and KYC regulations.

An adequate AML policy contains the below checks:

Authentication

Performing KYC verification through customer’s government-issued identity documents like ID card, passport, or driving license and store this information in a secure and automated database. So that the information is easily accessed for research or investigation purposes.

Watchlist Screening

Global monetary authorities issue and update sanction lists and Politically Exposed Persons (PEPs) which contain the data of high-risk persons. These persons are directly or indirectly involved in money laundering. To verify that the customers are not involved in money laundering, all the customers should be screened through the watchlists after KYC verification. The watchlist screening greatly kills the chances of money laundering.

Risk Evaluation

Financial institutions are required to label risky factors and how the procedures of dealing with them. As businesses have all the customers’ data while performing KYC verification and watchlist screening, risk evaluation becomes easy.

Transaction Monitoring

After identifying and verifying a customer the other step is transaction monitoring or Suspicious Activity Reporting. All financial transactions must be continually monitored by financial transactions. The SAR works on the business rules of an organization that how they deal with or identify suspicious activities. Like defining a transaction suspicious based on its amount. The US is going to mark all the transactions suspicious exceeding 250 US dollars. This means that all the working under US jurisdiction will have to check and screen the source and purpose of transactions above $250.

Reduce False Positives

False-positive means that AML screening software verifies a suspicious transaction. The high number of false positives causes difficulties in the implementation of AML compliance. Also, the resources spent on re-verifying those transactions increase. By adopting extended AML software a business can decrease false positives. Modern AML software is empowered with Artificial Intelligence and machine learning algorithms that screen all customers and transactions perfectly.

 

The coming years can experience a rise in money laundering. Thus, AML KYC compliance needs to be more productive and fast to combat modern money laundering. AML software with the above AML compliance features can reduce the amount of illicit cash involvement in the financial system.

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