Libraryblog7 anti-money laundering procedures and checks to complete

7 anti-money laundering procedures and checks to complete

For this reason you should regularly review your AML policies to ensure they’re functioning effectively and do not contain gaps that criminal actors can exploit. As part of this process, you should ask an independent expert to review your program on a periodic basis and provide you with feedback. This way, you can ensure compliance and keep bad actors out.

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December 15, 2022
Blog Post

In order to fight money laundering, the financing of terrorism, and other forms of financial crime, your business must have a series of anti-money laundering procedures in place.  

Here, we’ll outline 7 anti-money laundering procedures your business must deploy. We’ll cover why each is so important, and the steps you need to take to ensure AML compliance.

Use of identity verification checks

One of the main ways you can prevent money laundering is to verify the identities of your customers. By using an online identity verification service, you can ensure that each customer is exactly who they’re claiming to be.

These solutions first ask the customer to take a photo of their government-issued identity document (like a passport or a driving license). Once a photo of the identity document has been captured, the user is then asked to take a selfie. To help make sure the user can pass the identity verification checks on their first try, identity verification solutions like ours guide the customer through the process and provide real-time feedback on the user’s images. 

Using AI-powered technology, the software can carry out any identity checks your business requires. As well as inspecting the user’s document and ensuring authenticity, the tool can also extract biometric information from the photo and confirm that the user is who they say they are. Following this, your business receives an authentication decision in a matter of seconds. 

As well as helping you prevent money laundering, identity verification solutions like ours can also help you onboard more real customers. This is because, thanks to superior accuracy and an enhanced user experience, you can convert more real customers and reduce friction. You can also receive a verification decision in only six seconds.

PEP checks

As well as verifying the identity of your customers before you onboard them, you must also calculate the level of risk they pose. As part of this process, you should carry out politically exposed persons (PEP) checks on each prospective customer.

To comply with AML and KYC requirements, regulated businesses must run PEP checks as part of their due diligence process. These checks are designed to identify anyone who poses a heightened risk of money laundering.

The Financial Action Task Force (FATF) defines a PEP as an “individual who is or has been entrusted with a prominent public function.” The FATF adds that “due to their position and influence, it is recognized that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offenses and related predicate offenses, including corruption and bribery, as well as conducting activity related to terrorist financing.”

On top of this, it’s also important to note that someone may also be considered a PEP if they are in close proximity to someone in an at-risk position. This means that family members, close business associates, and beneficial owners of the person’s property can also be considered as PEPs. 

As well as conducting PEP checks before you onboard a customer, you should also continue to scan PEP lists regularly as part of your ongoing monitoring program. For this reason, many businesses run these checks automatically on a daily basis. However, at a minimum you should run these checks whenever the relevant lists are changed and/or whenever there is a change in the customer’s details. 

But remember, just because someone is a PEP doesn’t mean that you shouldn’t do business with them. However, it does mean that you need to be more vigilant when observing your business relationship. You must perform enhanced due diligence checks (EDD), and prove you have conducted the correct PEP screening.

Watchlist screening (sanctions check)

As well as performing PEP checks, you must also check that your customer isn’t on any watchlists or sanctions lists. By checking this information, you can ensure that your business understands exactly who your prospective customers are and the risks they pose.

Watchlists are essentially databases that include details relating to suspected terrorists, money launderers, and fraudsters. They’re usually held at the global or governmental level and are overseen by law enforcement professionals. Examples of sanctions lists and watchlists include:

  • HM Treasury Sanctions List
  • Office of Foreign Assets Control (OFAC) Sanctions
  • Bureau of Industry and Security
  • Department of State
  • EU Consolidated Sanctions List
  • FBI Top Ten Most Wanted
  • Interpol Most Wanted
  • ICE List (U.S. Immigrations and Customs Enforcement)
  • CBI List (The Central Bureau of Investigation)

By performing sanctions and watchlist checks, you can ensure that you’re not onboarding a customer who has been forbidden from accessing a financial service.

Written AML policy

When you start researching anti-money laundering procedures, you quickly realize how complex the process of devising an effective and compliant AML policy can be. For this reason, it’s vital that your company then commits its AML policy to paper. This way, it can be viewed (and reviewed) by executives, staff members, and regulators at any time. 

Within your written AML policy, you should ensure that there’s no room for improvisation and that expectations are clear. This means you should include details relating to:

  • The identification and verification policies you’re employing
  • The reports you’re creating
  • Your policy on record retention
  • The regulations you’re complying with and how you’re achieving compliance
  • Your communication and reporting procedures

Once you’ve created your AML policy, you should get it reviewed and checked by a third party. You should also schedule regular reviews.

Ongoing AML training

Once your AML policy is in place, you must ensure that all staff members who deal with customers or transactions are aware of your company’s policies and procedures.

As well as knowing your policies, these members of staff must also be aware of any legal requirements, the techniques used by money launderers, the checks they should make on individuals and transactions, and how and when they should report suspicious activities and transactions.

But, as well as receiving thorough initial training for these employees, your business is also responsible for ensuring that these employees are provided with regular refresher courses. This way, staff will always be aware of the latest regulations, and techniques employed by fraudsters and money launderers.

Compliance officer

Once your program has been devised, you need to designate an AML compliance officer who will be responsible for ensuring its implementation. This individual will also be responsible for ensuring that: 

  • Processes are followed and updated
  • Reports are filed
  • Training is correct
  • The system is running smoothly

An AML compliance officer should be a senior staff member. When you’re selecting a candidate, ensure you pick someone who has the power to influence the company on these matters, as the financial penalties and reputational damage that stem from non-compliance can be huge.

Continuous reviewing of AML screening and policies

It’s easy for businesses to become complacent. Remember, just because your AML policies are working now does not mean they will work forever. Smart and savvy criminals are always looking for ways to dupe companies, and regulators are continually changing the policies and procedures that firms must employ.

For this reason you should regularly review your AML policies to ensure they’re functioning effectively and do not contain gaps that criminal actors can exploit. As part of this process, you should ask an independent expert to review your program on a periodic basis and provide you with feedback. This way, you can ensure compliance and keep bad actors out.

How Veriff can help you with AML screening

Here at Veriff, we understand the importance of implementing the correct anti-money laundering procedures. To help your business fight financial fraud and ensure compliance with the latest regulations, we’ve developed our AML screening solution.

This unique solution can reduce risk for your business at every turn. It starts by deploying our identity verification service, which stops fraud at the gates. It then screens customers through sanctions and PEP watchlists globally, while also searching for adverse information and media.

On top of this, the solution also continually screens your customer lists and will monitor PEP watchlists, global sanctions lists, and adverse media on an ongoing basis. Automated screening notifies you if something changes with your existing or previously onboarded customers.

See how Veriff’s AML screening solutions can help you - book a demo

When you have the correct anti-money laundering procedures in place, you’ll find it easy to fight financial crime and onboard honest customers. If you’d like to learn more about how our AML screening solution can help you meet your compliance requirements, speak to our experts today. We can provide you with a bespoke demo that shows exactly how we can help you increase conversions while staying compliant.