Anti-money laundering (AML)

AML processes can vary by geography and company. However, according to the Office of the Comptroller of the Currency, under the Bank Secrecy Act (BSA), banks must:

• Establish effective BSA compliance programs
• Establish effective customer due diligence (CDD) systems and monitoring programs
• Screen against Office of Foreign Assets Control (OFAC) and other government lists
• Establish an effective suspicious activity monitoring and reporting process
• Develop risk-based anti-money laundering programs

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AML is important because money laundering can harm society, the world economy, citizens, and financial markets. By keeping an eye out for potential fraud and illegal activity, financial institutions can proactively reduce the risk of these transactions occurring.

The five stages, or pillars, of AML are:

1. Designate a compliance officer: Businesses must appoint a compliance officer who will evaluate current processes, determine where the business can improve, draft new policies, and ensure the new strategy complies with all current AML regulations and is implemented across the organization.
2. Develop internal policies: Businesses must develop internal policies that both monitor for suspicious activity and ensure relevant data is reported to agencies like FinCEN.
3. Create a training program for employees: Businesses must create training programs that educate employees about current trends, what to look out for, and how to report suspicious activity.
4. Ensure independent testing and auditing: The Bank Secrecy Act requires regular, independent testing and audits of AML compliance processes.
5. Deploy in-depth risk assessment: Finally, businesses must implement processes that allow them to evaluate both customers and transactions for potential risk.