A serious white-collar crime- money laundering- poses a significant threat to the integrity of businesses worldwide. It involves “cleaning” illicit funds obtained from illegal activities by obscuring their origins through intricate transactions and mechanisms. Successful money laundering renders the funds legitimate by the law and regulators.
Unfortunately, the cryptocurrency sector has become a prime target for money laundering due to the difficulty in tracking the source and actors behind crypto transactions. This article will explore the significance of anti-money laundering (AML) practices and how they can combat this issue in the reality of digital coins.
Understanding AML Screening
AML screening is a comprehensive procedure aimed at identifying and assessing the risks associated with money laundering within a company. This approach involves various routine tasks, including transaction monitoring, customer background checks, and evaluating the existing company ecosystem.
AML screening must adhere to KYC/AML/CFT (Know Your Customer/Anti-Money Laundering/Countering the Financing of Terrorism) requirements, which serve as guidelines for the entire AML process. Its primary goal is to predict or identify money laundering and other white-collar crimes that could harm the company and its stakeholders.
AML screening is often mandated by local authorities in most jurisdictions, necessitating an attentive inspection process for customers, suppliers, and employees. Identifying individuals or businesses associated with financial crimes or dubious entities in their history is crucial.
The Core Objective of AML Screening
AML aims to enhance the safety and security of individuals and businesses connected to a company. It also promotes transparency and compliance among companies, as AML regulations are strict, demanding diligent adherence to its rules. These regulations ensure that companies stay current with the ever-evolving landscape of white-collar crime and upgrade their security measures with the best practices available.
Establishing an Effective AML Screening Process
The key component of AML screening is transaction monitoring, which is optimally executed by gathering third-party data and cross-referencing it with relevant public information from government websites and databases. Transaction checks should encompass three vital aspects:
- Politically Exposed Person (PEP) checks
- Watchlist screening for criminal activities
- Transaction evaluations
In addition to verifying personnel and company backgrounds, regular monitoring of transaction activities is vital. The objective is to gain a comprehensive understanding of the behavior of suppliers, customers, and employees. Each transaction by stakeholders should be assessed against established benchmarks, as AML regulations provide. This process is particularly critical for companies with high transaction volumes, including exchange platforms, forex brokerages, casinos, and online stores.
AML regulations dictate that regular transactions should be evaluated based on factors such as amount, frequency, duration, location, and deviations from established norms. Unusual transactions, such as a significantly larger purchase by a consistently smaller client, should be flagged for inspection. While such changes may sometimes be coincidental, they can also indicate potential white-collar crime.
The duplicate checking should be applied to in-company transactions. If an employee from the reporting department makes a substantial purchase related to PPE or inventory, top management should investigate. Although for many companies, it may be hard to believe they have in-house AML risks, several cases of white-collar crimes have occurred within companies, justifying the need to probe unusual transactions.
In Conclusion
As technology continues to advance, so do money laundering methods. This underscores the importance of AML policies evolving in tandem with these criminal tactics. The future of AML screening and transaction monitoring lies in using advanced technologies and strict regulatory frameworks to maintain a secure financial landscape.
