Money laundering poses a major dilemma for businesses of all shapes and sizes. It is estimated that over $300 billion is laundered in the U.S. each year. While the regulations aimed at reducing financial fraud can seem quite complicated, there are electronic solutions available that reduce the burden on businesses by increasing reliability and reducing errors while also meeting all necessary legal obligations. One of these solutions is Anti-Money Laundering (AML) checks.
What Are AML Regulations?
Anti-Money Laundering (AML) checks are an inescapable part of doing business today. AML regulations require all businesses and financial institutions to take sufficient steps to combat fraud and identify theft, specifically addressing the potential of the “laundering” or transacting of illegal funds.. Financial institutions and public bodies use AML checks as part of their Know Your Client (KYC) obligations, but other companies also conduct a range of checks to protect themselves from fraud.
While AML checks are a legal obligation, their significance stretches far beyond upholding the law. Businesses that fail to abide by KYC and AML regulations could find themselves saddled with substantial fines, as regulators are keen to encourage and enforce AML compliance.
Beyond the financial risks of non-compliance, businesses that do not conduct the necessary AML checks on their customers could suffer from reputational damage, and perhaps even face criminal charges (MRLOs are subject to a fine of three million Euros. The consequences of non-compliance are steep, and simply not worth the risk. That is why is it vital that all organizations review their KYC/AML policies to ensure they are actively monitoring for any potential criminal activity.
When Should You Use AML Checks?
AML checks can take various forms depending on the type of business and the type of transaction involved. Broadly speaking, AML checks encompass anything from ID verification checks to transaction audits to due diligence in identifying high-risk clients, irregular financial transactions or Politically Exposed Persons (PEPs).
AML checks should be conducted by any company where there is potential for employees and/or customers to pass illicit funds or assets off as part of legitimate transactions. Banks or financial institutions should conduct AML checks when hiring employees when new accounts are opened and as part of their ongoing audits of deposits and transactions. If any suspicious activity is found, it should be reported to the authorities right away.
How Long Do AML Checks Take?
In the past, AML checks have been notoriously time-consuming and prone to human error. In today’s fast-paced business environment, especially in highly-competitive industries such as lending and real estate, the added pressure to meet targets quickly requires being able to do AML checks quickly and efficiently–often even remotely. Databases such as those provided by Aristotle Integrity in their FundSourceLite™ service enables fintech companies to highlight irregularities in financial transactions.
Electronic identification is widely recognized as the most reliable, secure, and efficient source of information for ID verification. Eventually, electronic AML checks may rid entirely the need for error-prone and time-intensive manual checks. Additionally, with the ever-increasing risk of forged identity documents, electronic AML checks can provide its users with enhanced confidence and security.
The real estate sector has seen a greater share of fraudulent activity in recent years. This can probably be attributed to proper AML checks not being done on potential sellers and buyers, making the sector more attractive to would-be criminals. That isn’t to say that AML processes aren’t in place in the real estate industry, though. A more likely explanation is that AML checks are being carried out, but that fraudulent documents, such as passports and driving licenses, are now so sophisticated that manual checks are failing to spot the fakes. Introducing electronic automated document checks offer an ability to spot fakes in documents using AI capabilities that are far beyond human skills.
Electronic AML platforms can also reduce the risk of fraud by validating client information against various credit reference and other identity databases. AML platforms automatically screen potential applicants or clients against worldwide sanction lists and PEP (politically exposed person) watch lists which contain over 2.5 million data subjects. Using a KYC/AML platform is quicker and easier than manual checks, and it is much more accurate, as it can validate identity claims using current data from companies such as Aristotle.
By switching to an electronic AML platform, businesses can carry out near-instant AML checks, receiving the results of their verification request in seconds. Search results are delivered back to the user in seconds, often denoted simply with a green tick or a red cross–reducing the risk of user error in interpreting the results.
Electronic AML checks can also be performed remotely. Companies can perform the same comprehensive AML checks on their customers whether they are in the office or out in the marketplace. This gives employees more freedom and flexibility, so they can concentrate on serving their clients rather than getting bogged down by bureaucratic compliance.
Build Your Digital ID Verification Process with Integrity
Integrity by Aristotle has built a powerful suite of identity verification solutions that can be configured to carry out a wide range of functions to help you to prevent fraud and avoid costly regulatory fines. ID-Direct is a web-based solution that allows you to quickly and conveniently authenticate individuals online against our database of government-issued IDs for citizens of 135 countries around the globe. Contact us today to learn how we can help your business build a safe and effective risk-based digital ID verification protocol.