Wednesday, December 1, 2021

Anti Money Laundering working against financial frauds in banks

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In most cases, people involved in money laundering are politicians or belong to the higher ranks in the government sector. That’s why money laundering is easier for them and they remain undetected by the jurisdiction. Different AML solutions have appeared on the scene to counter money laundering accounts. Institutions dealing with financial assets are especially working to improve their system to prevent the attempts of money laundering. As the cash used in money laundering is mostly coming from illegal activities, the inclusion of that money into the normal flow of transactions can unstabilize the financial market. AML compliance is integrated into the system of financial organizations to work against money laundering.

What is Money laundering?

Hiding the real source of the income and converting the money earned from illegal activities into “clean money” is coined as money laundering. If proper measures aren’t taken to detect the money laundering activities, it can become very harmful for the balance of the country and can tarnish the reputation of an establishment. 

3 stages of money laundering

  1. Placement
  2. Layering
  3. Integration

Placement

Placing the money into the bank. 

Layering

Hiding the source of the laundered money with various transactions

Integration

Bringing the dirty money into the economic system. This is mostly done through,

  1. Shell companies
  2. Fake properties
  3. Foreign banks
  4. Import/export

What is AML monitoring?

To hide their background and alleged activities, criminals wash their dirty money through financial institutes; mostly banking. AML screening is detecting those illegal operations and stopping the process of legitimizing black money. In definition, Anti Money Laundering is a set of regulations and compliances that financial institutes have to follow to provide secure and legitimate money transactions.

How to prevent money laundering frauds?

Anti Money Laundering (AML)

AML solutions are brought into being to stop money laundering attempts. AML monitoring makes sure that an organization is following the security checks measures taken to ensure that a person is not depositing laundered money into their account. In case any illegal activity is detected, the financial institutes are supposed to immediately report it.

Know Your Customer (KYC)

KYC and AML security go hand in hand. Know Your Customer ensures that the person is actually what he is claiming himself to be. This is essential in financial institutes to be implemented, mainly because they have to deal with the monetary assets of a person.

  •  If they implement KYC with AML, the chances for illegal activities will be handled with greater accuracy.
  •  If the person has ensured his background validity, his basic identity, and his income sources, there is a little chance that his money would be coming from the black market, and if it does, AML screening is there to help save the day. 

Risk management

Organizations should go through the process of risk management. Because different organizations pose different levels of threats against money laundering, the same set of AML systems is insufficient for the complete protection of the organization. Taking notice of the given fact, organizations should first run a thorough examination of their risk management and design an appropriate policy for Anti Money Laundering.

How AML Verification can stop frauds in banks

Banks come under the radar when money laundering is discussed. Because banks are the biggest source of money transactions, there is a huge probability that criminals shift there to work on their illegal agenda of legitimization of dirty money. Through AMLverification, we can stop this. 

  • When a customer comes to open an account, his credentials should be clarified and his income sources should be confirmed first, which is KYC
  • KYC confirms the identity of the customer and analyses what level of money laundering risk that person can offer.
  • After that, AML regulations come into the scenario, where it monitors the monetary activities of that customer.
  • AML solutions verify the suspicious activities of the customer related to frauds, corruption, terrorism funding, human trafficking, smuggling of drugs, and tax evasion. If any suspicious activity is detected, banks are supposed to alert and report those activities to the authority.

Using artificial intelligence in AML compliance

With the aid of artificial intelligence, we can design a fast delivery service for AML compliance. The system can extract the information from the user’s document and can compare and analyze it against the global AML sanctioned list of people, watchlists, and Politically Exposed People (PEP) lists in a real-time fashion.

The ending statement

By the addition of artificial intelligence in Anti Money Laundering, we can speed up the process of AML monitoring in our banking institutes and prevent illegal activities.

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