Money laundering is a more substantial issue than most people realize. Recent estimates by a United Nations panel say that around 1.6 trillion dollars of dirty money flow into the global financial system. Anti-money laundering (AML) is about fighting this illegal act. AML laws help to uncover illicit activity, protecting financial organizations, businesses, and entire countries.
What is Money Laundering?
When criminals launder money, they disguise ill-gotten gains into legitimate funds. There are many ways to do this, but it usually involves layering transactions to bury paper trails and make funds appear to be honestly earned. Money laundering can hide an assortment of crimes. It often conceals tax evasion, drug trafficking, political corruption, terrorism, and more.
About AML Laws
Whether you're a bank working with high-value customers or a company performing marketplace payouts, AML compliance is paramount. These unique regulations help stop money laundering by requiring organizations to do their due diligence. Instead of working with just anyone, businesses have to know their customer.
Know your customer (KYC) processes are a standard form of AML compliance that requires organizations to collect and verify personal information. Banks must go a step further by understanding the nature of the customer's activity and proving that the money they use comes from a legitimate source.
Verifying information can be a hassle, but it's a necessary step in the fight against widespread money-laundering schemes. In addition to reviewing basic identification data, companies must screen the information against global watchlists, names on a politically exposed person database, and entities under economic sanctions.
Every business must comply with AML laws. It doesn't matter if they're a big bank handing out multi-million dollar loans or simple service providers sending marketplace payouts. Gathering the necessary information and doing due diligence is not something you can avoid. It's not something you want to avoid, either.
AML laws protect companies just as much as they find criminals and prevent large-scale financial crimes. It helps organizations assess their risks and become warier about who they do business with within their everyday operations. It protects the bottom line and helps avoid liability issues.
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