AML Checks Meaning and Best Practices

Money laundering is one of the major issues in the financial and banking industries. 

As of 2022, 90% of ML crimes remain undetected, leading international bodies, countries, and businesses to take action. Such a set of measures is called Anti-Money Laundering, and it incorporates regulations, AML systems, and other tools to prevent the circulation and usage of illicit funds. 

At present, AML involves complex procedures on the part of both the authorities and businesses. The main task for governments is to make sure their legislation can “keep up” with financial crimes, as the schemes are becoming increasingly complex each year. Harsher legislation, in turn, represents a new challenge for businesses. To stay compliant, they need to update internal policies and adopt AML software for client checks — as it is no longer possible to gather and process a sufficient amount of information manually. 

This article will explain what is an AML check, why is it needed, and what IT solutions to use to achieve the most effective results.

What Are Anti-Money Laundering Regulations?

Being a relatively new issue — with less than 50 years of existence — money laundering is evolving very rapidly. This is proportionally addressed by policymakers.

The first international attempt at anti-money laundering was made in 1989, with the establishment of the Financial Action Task Force (FATF). This organisation promotes the development of AML legislation and policies across the globe. Following the 9/11 attacks, FATF extended its mission to combat the financing of terrorism.  International organisations such as the International Monetary Fund (IMF) and the United Nations have also taken measures to prevent ML crimes.

The regulations vary across jurisdictions. Currently, the major piece of AML legislation in the US is the Corporate Transparency Act of 2021. EU companies must follow the 6th Anti-Money Laundering Directive (6AMLD). In the UK, there are several laws to follow, including:

• the Proceeds of Crime Act 2002 (POCA). 
• the Terrorism Act 2000.
• the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. 

With ever-increasing punishments and fines for non-compliance, AML search meaning is fundamental for business. The IT industry offers AML systems to bring your screening process to the next level. Get LIGA UNITED today to never miss regulatory updates and be sure about every client.

What Are Anti-Money Laundering Checks?

AML checks are types of measures that companies take to prevent the legalisation of criminally acquired funds through their business. Common steps include verifying the identity of the client and recent transactions.

Today, most countries have legislation in place to prevent money laundering. As a result, firms and private specialists who are more likely to encounter financial crimes are required to comply with the law and conduct anti-money laundering checks. AML qualifications are crucial for multiple business categories, including:

• Banks and financial institutions.
• Insurance companies.
• Lawyers, accountants, real estate agents.
• Crypto companies. 
• Crowdfunding services.
• Casino and gambling industries.

The scope of an AML investigation will depend on several factors. Apart from legislation within a certain state, the measures might differ from practice to practice — for instance, a solicitor can pay attention to other details than a bank. The process will also depend on the client themselves. What is their job title? What is their PEP status or affiliation? Which country are they coming from? Taken on a case-by-case basis, some customers will undergo in-depth checks, whereas others will require nothing more than ID verification. 

In case of failure to carry out checks, firms can face serious legal consequences and penalties. LIGA UNITED AML software will protect your firm from risks, provide information about every customer at your fingertips and instantly notify you of any changes. 

Which Information Do AML Checks Evaluate?

Anti-money laundering procedures are highly individualised, as mentioned in the previous section. However, there are some common cases and types of information which are scrutinised by firms. They are presented below. 

Let's look at a simple scenario first. A new client applies to a bank or an insurance company. In any event, the company will check their details — first name, last name, residential address — and ask for an ID. This is the minimum requirement that anyone who has ever applied for financial services has faced.

But there are also more complex cases that standards setters and regulators require to be treated more carefully, for example:

• Transactions with a significant amount of funds (€15,000 and above).
• The client is a resident of a sanctioned country.
• The operation does not make logical sense (geographical remoteness, lack of commercial viability, etc.).
• Any other circumstances where the firm has questions about the transparency of the client and the reliability of his data.

In such cases, the company must conduct a more detailed AML check and request additional information — details on the business, beneficial owners, supporting documents regarding the origin of funds and the nature of the business relationship, and so on.

It must also be borne in mind that the client's activities can change at any time, so companies require round-the-clock monitoring. At this stage, this task is impossible without automated AML systems, given the complex dynamics of business relations, and the rate of change in the information and legal field. Try LIGA UNITED to easily find complete information about customers and keep track of their changes.

Why Are Anti-Money Laundering Checks Needed?

The high-profile scandals of the Panama Papers and the Pandora Papers showed how difficult financial crimes can be to uncover. Criminals are trying to invent more and more sophisticated money laundering schemes, with long chains of figureheads and shell companies.

At the same time, the legal obligations for companies are not going anywhere. On the contrary, every year lawmakers introduce even stricter regulations and increase fines. In 2020 alone, ML violations cost world banks $10.4 billion in fines.

To protect against risks, companies need specialists with AML qualifications in the UK, as well as effective internal compliance procedures. It should be remembered that high-risk customers require in-depth research not only during the onboarding stage but on a full-time basis — that is, firms have to pay attention both to the information collection and analysis system and also to the monitoring system.

Reputation is another reason why AML qualifications in the UK are of high importance. If your business is involved in financial scams or serves dubious clients, it can alienate reliable partners. Because of this, the adoption of AML systems and procedures is a guarantee of your company's stability.

How Are Anti-Money Laundering Checks Done?

AML procedure will vary depending on your business type, size, and country of activity. As the majority of companies use a risk-based approach for their assessments, many factors will be driven directly by clients and the risks they present.

Regardless of the individual characteristics in your verification process, you will have to analyse a large amount of data to correctly assess the prospects for new business relationships. Manual operations — at the level of modern requirements — cannot provide all the information and the quality of analysis, so more and more companies use AML software. It helps to handle each stage of the check more efficiently:

1. Verify customer identity, company information, basic registration details,
2. Check if the customer is on any sanctions lists.
3. Screen for negative media mentions.
4. Identify key business connections and partners for companies under scrutiny.
5. Set up automatic monitoring of your client, including publications in the media, changes in the sanctions status, type of activity, new court decisions, etc.

The result of the check should be a clear vision of your client and an assessment of the risks regarding cooperation, both current and long-term.

How To Choose The Right Solution For AML Checks

Anti-money laundering checks may seem like looking for a needle in a haystack due to the amount of information to be processed. They may also cause many questions and “headaches” for company management. Does the company have employees with AML qualifications in the UK who can create effective compliance programs? What tasks require special attention: is it an AML ID check, transaction verification, or establishing accurate beneficial relationships?

Fortunately, the RegTech market offers a large variety of AML software to deal effectively with the challenges.

When choosing AML software, you have to understand the regulatory specifics to assess the needs of your business. The most difficult cases are represented by multi-jurisdictional companies that operate in many countries, but even so, IT solutions provide multinational databases and legal bases, so you can easily cope with the flow of information.

LIGA UNITED is a risk management and due diligence solution for companies. It collects data from Worldwide and British registers and sanctions lists, multiple media resources — so you get a 360° view of each client. 

1. Use a unique visual tool to identify business connections.
2. Check in a single click whether a company or person is on the sanctions lists, has toxic ties with Russia and Belarus, and more.
3. Check out the company's reputation in the media.
4. Don't miss critical changes with automatic monitoring.

Get a demo of LIGA UNITED now to discover the benefits of the product.