All You Need To Know About Sanctions Related to Money Laundering

Anti-Money Laundering laws serve as an important way for financial institutions to prevent financial crimes. Money laundering is a way to hide income from criminal activity. It can be hidden in many ways from the government, by claiming it was from a legitimate source like a business or foreign transfer.

Governments around the globe have announced regulations and anti-money laundering laws, starting with the development of the FATF. The FATF acts as a global network with the G7 to fight against financial crime.

Financial institutions continuously keep up with changing regulations by following these six procedures.

Anti Money Laundering Laws (AML)

Anti Money Laundering Laws are regulations that prevent money laundering from happening.

The primary purpose of AML laws is to target criminal activity. There are a series of procedures that this implements onto companies and banks.

Know Your Customer (KYC) Procedure

This procedure is where companies, such as banks, look for odd transactions.

Any odd transactions, unknown customers with large transfers, or ‘business income’ are targets. It is part of the procedure for companies to report transactions over 10,000 dollars.

For example, if this customer is known for minimal transactions and is caught with an odd ‘business transaction’ over 10k, that is a red flag.

On top of KYC measures, institutions can apply customer due diligence. The point of due diligence is to assess any customer potential risks. Political-exposed people (PEP), although, are considered high risk. Therefore, institutions use Enhanced Due Diligence procedures for a more extensive assessment of high-risk customers.

Economic Sanctions

Economic sanctions play a role in distinguishing those who could pose a threat of money laundering. Economic sanctions are placed on countries with high terrorist or criminal activity.

Customers making large transfers to a country could be on a sanctions list for themselves. Companies complying with AML laws keep track of sanction screenings and lists to prevent any criminal activity.

Sanction Screenings & Sanctions Lists

A part of AML procedures is sanction screenings. This is broader than KYC procedures. These screenings are in place to catch possible customers or organizations on global sanctions lists. Sanction screenings go over potential parties or customers that pose risks of financial crimes.

Sanction screening aims to prevent those on lists from completing suspicious transactions. These procedures are necessary and need AML compliance from financial institutions to work.

AML Compliance

Companies must keep up with AML regulations. Unfortunately, some companies find it difficult to keep up with constant changes to these regulations.

For companies to keep up, they have employees who ensure that they follow these changing regulations.

These employees specifically keep track of company movements, noticing any violations of regulations. They keep up with both sanction lists and screenings so that financial institutions or companies do not fall short or wind up with a criminal case.

Importance of AML and KYC Procedures

Both KYC and AML procedures are crucial to follow. KYC acts as a way for banks to keep up with customers.

AML is broader, focusing on possible federal crime and terrorist activity.

Without KYC and AML compliance from banks, money laundering and financial crimes would increase. Financial institutions will enforce action through regulation and reduce any risks using these procedures.

For more information on AML solutions, contact us today!