What is AML?
- John Wilson
- Apr 3, 2024
- 1 min read
AML stands for Anti-Money Laundering, which refers to a set of procedures, laws, and regulations designed to stop the practice of generating income through illegal actions. Essentially, AML rules prevent criminals from disguising illegally obtained funds as legitimate income. These laws cover a broad spectrum of financial crimes involving the laundering of money, including drug trafficking, fraud, and tax evasion, among others.
The key components of AML efforts include:
Customer Due Diligence (CDD): Financial institutions are required to verify the identity of their clients and assess their risk profiles.
Suspicious Activity Reporting (SAR): Organizations must report any financial activity that they suspect may be linked to money laundering.
Transaction Monitoring: Continuous monitoring of customer transactions to identify patterns that might indicate money laundering or other financial crimes.
Record Keeping: Financial institutions must keep detailed records of customer identities and transactions for a period of time, typically five years, to facilitate potential future audits or investigations.
AML regulations are enforced by various national and international bodies, and compliance is mandatory for financial institutions, including banks, investment firms, and certain types of non-financial businesses. Non-compliance with AML measures can result in hefty fines and legal actions against the institutions or individuals involved.