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September 23, 2022

Understanding Anti-Money Laundering Checks (AML Checks)

Anti Money Laundering (AML) Checks are important to keep a check on money laundering activities in a business. To know more about AML checks in detail, click here!

Introduction

AML checks prevent businesses from handling or being involved in money laundering. Financial institutions and organizations use them to verify identity and ensure that they do not connect any financial transactions we conduct to criminal activity.

What is Anti-Money Laundering (AML)?

Anti-Money Laundering (AML) is detecting and preventing money laundering activities. Money laundering is when an individual or group has criminal funds, usually through illegal activities like drug trafficking and terrorism funding, but wants to disguise its origins so they can use it without raising suspicion.

For a business to sell products or services legally in most countries, it must have a license from the government, which requires them to comply with AML regulations. This ensures that our money is not being used for criminal purposes.

Businesses that conduct cash transactions need not only to check whether they have convicted someone of any crimes but also to do background checks on all customers who want access to their financial systems.

Inclusion of Anti-Money Laundering checks in KYC

Know Your Customer (KYC) is a process that ensures that the customer is who they say they are and that they are not involved in any illegal activity. AML checks are part of KYC and are typically done by financial services companies like banks, credit card companies, and insurance companies.

Every customer that wants to use a financial service must go through an AML check before they can do it. This includes opening an account with a bank or buying insurance coverage from an insurer.

Information required for Anti-Money Laundering checks

When we apply for an AML check, they will ask us to provide:

  • Full name, address, and date of birth
  • Identification document (e.g., passport or driver's license)
  • The bank account number(s) we wish the report to cover
  • Ownership or control of the company—if applicable

Additional information may also be requested from us, such as ownership structures, sources of funds, and the time our account has been opened. They'll need our activity history, the type of account opened, and the purpose of the account relationship.

The bank will review our application after we have completed it. Once the information has been verified and approved, we will receive a copy of the report via email or postal mail.

Once received, checking the information against any existing records or documents is essential. If there are any discrepancies or errors, we must contact the bank immediately and request that they correct them. Maintaining accurate and up-to-date information will ensure the security of our personal information.

Why are Anti-Money Laundering checks being done?

Money laundering is concealing the proceeds of a crime to make it look legitimate. The term "money laundering" is often used to describe activities involved with criminal offenses such as drug trafficking, terrorism financing, corruption, and fraud.

Money laundering involves three steps: placement, layering, and integration. Once funds are received from the commission of an offense, criminals will attempt to conceal their illegal origins by transferring them through several intermediate transactions until their origins cannot be traced back to their criminal origins. 

For example, if one sold drugs on the street and deposited their money into a bank or withdrew cash from an ATM, this would be considered placement, whereas keeping it in cash would be considered layering.

A deposit into an account or withdrawal from an ATM makes the funds indistinguishable from other forms of money so that law enforcement agencies can no longer trace them back to their source (illegal activity).

Conclusion

AML checks are a legal requirement for financial institutions, and there are several steps for a business to take to ensure they comply. For instance, all employees in the organization must understand the importance of AML checks and their role in helping prevent money laundering. We can also make sure compliance is accessible by using an automated solution like KYC3, which allows us to conduct AML checks quickly and efficiently while maintaining complete control over all data collected on customers through our dashboard interface.

FAQs

Q1. How are AML checks done?

Anti-money laundering (AML) checks compare a customer's information to government databases. This check is commonly done by banks and financial organizations, although other firms may also undertake it.

Q2.What are the three stages of AML?

The three stages of Anti-Money Laundering are:

1. Customer due diligence

2. Transaction monitoring and reporting

3. Suspicious activity reporting

Q3. How long does an AML check take?

An anti-money laundering check can take a few days to several weeks. Depending on the type of check, the amount of information requested, and the required documents, it may take longer.

Q4. How often do you need to do AML checks?

The frequency depends on how much money, how many individuals, and how frequently you trade. If you operate a small company and only take cash for purchases under $10 (because banks impose fees otherwise), they may only do your AML check every few months. If you handle several million dollars in accounts, they will need you periodically or, more frequently, your AML check.

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