Nearly 50 billion dollars just in West African countries are laundered every year. This is only the one side of the African continent that shows how African countries are prone to money laundering and other financial crimes.
What about the other part of the world? No area of the world is safe from such crimes as FATF reports reveal that between 0.8 trillion to 2 trillion dollars are laundered every year across the world. The money used to assist the terrorist entities isn’t included in this amount.
How do criminals launder such a huge amount without being detected? The reasons are many but one of the major issues is the weak AML/CFT compliance program in the financial institutions.
To counter money laundering and terrorist financing activities, financial institutions first need to accept that any business can be exploited by criminals for money laundering and other financial crimes. This will create a sense of alertness among the compliance team and encourage them to stay ahead of the criminals.
This piece of writing will provide you with the best practices implemented which will help businesses to create the AML/CFT compliance program that complies with the international AML standards.
Is AML/CFT Compliance Program Essential for Financial Institutions?
The AML compliance program is a set of predefined rules and regulations set by international regulatory bodies to ensure that businesses implement them and use these programs for detecting, monitoring, and reporting money laundering and terrorist financing crimes.
As far as the AML/CFT compliance program necessity is concerned. This is not obligatory for financial institutions to implement these programs just to avoid money laundering and other financial crimes, but also to help businesses to enhance the customer’s trust and attract more potential clients.
How AML compliance program help financial institutions? By implementing compliance programs, the business can easily detect and monitor the risks associated with money laundering and other financial crimes. Therefore, one can say that yes, the AML/CFT compliance program is essential for FIs to implement them comprehensively.
4 best practices to build an Effective AML/CFT Compliance Program
There are standard elements set by regulatory bodies for almost every industry, business, state, and country. But here we will provide you the guide following which you can establish a robust AML/CFT compliance program.
1. Understand the regulatory compliance in your Jurisdiction
Before implementing any AML regulations in your compliance efforts, businesses first need to understand what sort of regulations are used in such countries.
However, you will find that most of the countries have already implemented AML regulations in their jurisdiction to mitigate the chances of money laundering and other financial crimes. All you have to do is to check the AML regulations your business must comply with.
The financial institutions running in the USA jurisdiction need to follow the Bank Secrecy Act to combat money laundering activities. This also ensures that the business performs the enhanced due diligence process and implements a robust monitoring and screening process.
2. Create an Internal Compliance Team and Manager
The compliance team takes responsibility for detecting, monitoring, and reporting suspicious transactions made in the organization. Therefore, the organization must establish a compliance team of skilled individuals, who are well-trained and experienced in combating money laundering activities.
Within the team, it is very crucial to choose the right person as a team lead/manager who makes all the decisions related to the AML/CFT compliance efforts. The compliance manager must have the required skill set to understand the latest regulations, adopt any new changes in the regulation, and be able to think out of the box to detect the less known ML techniques.
3. Create Your Own Internal AML Compliance Policies
Even before creating your internal policies, businesses first need to assess the level of risk their organization faces. The AML/CFT compliance program provided by the international regulatory bodies would not be enough to combat criminal activities. Businesses need to create their internal policies as well that must be aligned with the rules and regulations set by the regulatory bodies.
The general practice of implementing internal AML/CFT policies is to implement enhanced CDD, and KYC, and incorporate the advanced AML monitoring and screening solutions. Also, define your internal SOPs that will allow you to assign specific tasks to the relevant persons.
4. Incorporate the Advance Monitoring and Screening Solution
the criminals are very fast in applying new techniques and committing criminal activities like money laundering and terrorist financing.
So, the business should also incorporate advanced solutions that quickly perform CDD in the most accurate ways without compromising the quality.
AML Watcher’s advanced screening AML compliance solutions allow you to screen your clients against thousands of watchlists, PEP lists, and Corruption lists. The automatic screening solution will help you to:
- Screen out Client data and transactions quickly
- Screen against global watchlist, PEP list, and other sanctioned list
- Verify your client’s identity while onboarding
