Money-laundering is a practice that criminals use to clean their illegally obtained funds. A large sum of money gained through illegal means cannot be deposited in the banks or used properly without clearing its source. This is why criminals manipulate the system to wash their black money. To eliminate this practice, AML compliance was introduced. AML anti-money laundering compliance is a regulation that requires organizations to verify the identity of all their potential clients to make sure that they are not previously involved in any illegal activity. This blog will talk in detail about the importance of AML compliance and how artificially intelligent solutions have made the verification process.
How is Money Laundering done?
Criminals use shell companies as their front business. Shell companies are companies that do not exist in reality and their existence is only through papers. These companies pretend to provide products or services and use that to pass their money through the system and legalize it. Online platforms like freelancing have made this so much easier for the criminals now. The anonymity factor allows criminals to transfer a large sum of money out of the country before verifying the source or origin of the money.
Another example of a shell company is that the criminals can have a restaurant that is their front business. They can manipulate the receipts and change the numbers to clean their black money.
Ever since the major shift into the digital world, even the currency has turned digital. The trend of crypto exchange might be convenient but criminals have taken major advantage of it. The anonymity factor in the crypto exchange allows the criminals to pass their money from the crypto exchange to another without revealing their source.
To fight these growing money laundering crimes, we need a permanent solution.
In the 1970s, there was an increase in money laundering activities due to an increase in drug trafficking from Columbia to the USA. To stop these endeavors, KYC and AML regulations were passed through The Bank Secrecy Act. KYC- Know your customer is a requirement that made all the banks and organizations properly record and verify the identity of all their customers. AML regulation required them to investigate their background to ensure that they were not involved in any money laundering activity. In 2001, when the 9/11 attack occurred, these AML checks were made more stringent as money laundering can be used to finance the terrorists. Global regulatory bodies like FATF and FinCEN were made to ensure that the countries were following AML compliances. If any organization fails to comply with these regulations, it can face penalties from the regulatory body of its jurisdiction.
However, complying with these protocols is a long and tedious process. It takes a good sum of the operational cost to perform verification on each and every customer individually. Not to forget that the accuracy of such a process might not be guaranteed either.
AML Program Solution
There are now artificially intelligent solutions that can provide anti-money laundering checks online with an accuracy rate of 98.67%. These solutions not only provide accurate service, but they can also perform identity verification within seconds. It saves the operational cost of carrying out verification of each and every customer and also it saves the organizations from facing a large sum of penalties and risk of permanent closure of their business if failed to properly carry out the aml system.
How this system works is that first the identity of all the customers is verified through AI-based software. The identity of the customer can be verified through their face by facial recognition technology or document verification by screening and matching the documents and verifying the documents. Then the verified identities are matched and screened against Politically Exposed Persons, global watch lists, or adverse media. These watch lists are provided by global regulatory bodies like FATF. The person who has been involved in the money laundering activity before will not be verified. The aml solution will alert the businesses of the potential risk that they might end up dealing with.
This solution has been a great help to many industries.
Counterfeiting of money and financing terrorists are universal problems and there is no discussion related to it. Each year, billions of dollars are astray due to the counterfeiting of money. As stated by the study of the united nations office on drugs and crimes, the evaluated amount of money laundered globally per annum is two percent to five percent of GDP which amounts to be two trillion USD.
Global regulations such as financial action task force and the world banks with local authorities such as general data protection, EUT, EU, and FINMA are to keep a tight hold on money laundering activities. Major countries are following the recommendation of the monetary regulations authorities such as financial action task force in indulging crimes such as money laundering. The FATF is an international regulatory that provides suggestions to nations with respect to their measures to limit terrorism financing and counterfeiting of money.
The lists are given to legal enforcement regulatory bodies in the case of any illegitimate tasks is done by people to bring them under the regulations.
How automation can aid in AML compliance?
The main part of AML software is an ongoing screening of clients. Anti-money laundering screening solutions powered with AI can split this charge of obligation entities. Anti-money laundering screening software firstly authenticates the identity of a client and then screens their names against global watchlists that are rigorously updated. Ongoing monitoring is no more frustrating with business address verification as it’s designed to embrace anti-money laundering after prearranged intervals. So each organization gets personalized solutions to comply with needs.
One might choose to perform manual anti-money laundering screening on the client by checking them against the global watchlists but it will insufficient in results. On the other hand, intensifying an in-house anti-money laundering screening software will not be attainable due to the increased cost.
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Anti-money laundering authentication software provides universal coverage and can authenticate the individuals the people from all the spheres, one won’t have to hire various manual anti-money laundering and know your customer authentication solutions can authenticate the identity of an individual within seconds and increase user experience. The cost of compliance is insufficient and technical requirements for integration are quite easy.
How online Know your customer & anti-money laundering screening will aid?
The client of these organizations are from every area of the sphere so manual authentication is not achievable. Evolving in-house authentication system needs frustrating resources and support costs, so it is not a sufficient answer.
Online know your customer and anti-money laundering solution is a cost-beneficial and simple answer that delivers with high precision within a second. It is the time that MSBs should infuse in id card address check and anti-money laundering because the regulations have recognized the danger in this industry sector and are all set to give a difficult time to non-compliant organizations.
Summing this up
To conclude this, AMLsoftware is difficult due to regulatory bodies and to enhance your industry in a safe environment without the danger of fraud or non-compliant thefts. It is a difficult investment that assurance long-term advantages. Laundering of money and terrorist financing are major substitutes in our nations that desire to reduce completely. But this cannot be attained immediately. It takes quite a few times of hard work, automation, law regulations, compliances, and mostly complete will to combat these difficulties. We should all unite with our regulations and agencies to acquire money launderers, fraudsters, identity theft, and criminals. One of the most efficient processes of doing this is by indulging anti-money laundering software into our software and business procedures.