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Anti-Money Laundering compliance: diligence is vital

As Benedict Spinoza’s famous saying goes: “Ignorantia non est argumentum.”  Ignorance is not an argument in many cases, including criminal and civil liability. It is very true when Anti-Money Laundering (AML) compliance is concerned as well. 

If you do not want your company to be a part of a criminal chain, you should know how to protect your business from becoming a “laundromat” for financial offenders. 

Businesses should be always vigilant and diligent in their AML activity in order not to become a part of criminal schemes – even unwillingly – and be punished by law for that. 

To secure your organization from missteps and misguiding decisions, you should be aware of crucial facts about money laundering and how to avoid it. 

Our article consists of two parts. Part Two “Anti-Money Laundering Solutions: The Digital Great Wall Of Fintech” will give you a detailed glance at AML software and its functionality.

Identification of an enemy is the first step to win it. That is why it is necessary to know what money laundering is, how it works, and what spheres it may cover. 

Money laundering is the attempt to conceal or disguise the nature, location, source, ownership or control of illegally obtained money.

The definition covers a wide variety of activities. It is necessary to understand how criminals launder money to identify money laundering at the point of origin and know-how to prevent it.

To help prevent the laundering of cash and to obtain documentation that may be used to prosecute money launderers, the government requires businesses to file specific reports and maintain records on certain cash transactions.

There are three stages to Money Laundering you should be aware of:

  • Placement is the step when funds derived from criminal activities are used in legitimate money transfer.
  • Layering is used to hide the first transaction by creating a series of transactions.
  • Integration is a return of funds to legitimate criminal activities. 

Placement causes the greatest risk to businesses, because transactions may be structured to avoid recordkeeping or reporting thresholds. And false identification and/or information may be provided.

Layering can cause essential damage. But it is easily recognised by automated AML solutions due to its repetitive nature. Especially, if transactions almost reach the limit, when sender’s authentication is needed. 

Integration is the final step, when consolidated smaller transactions are accumulated. It often ends with money transfer for services or goods that has never existed. For this purpose, shell companies are used.

AML compliance. Gutta cavat lapidem – waterdrops pierce rocks

Anti-money laundering measures are often described in local legislation. But think and decide, if it is enough for your business security. 

Every financial company has its own AML “Bushido code.” But structurally, they generally consist of 5 major sections:

  1. Detection of suspicious activities. The goal here is to have systems in place to prompt the activities associated with money laundering. 
  2. Risk assessment. The step that gives a full understanding of the different tiers of risks a customer presents and how to mitigate them. You can determine if a customer is low-risk or high-risk according to the customer risk score. 
  3. Internal controls. They are policies designed to mitigate the risks of money laundering and support compliance with local AML regulations.
  4. AML compliance training program. This step is necessary to ensure that employees are familiar with AML legislation, including their roles and obligations. An ideal AML training program is interactive and done regularly.
  5. Independent audit. The step of a thorough review of the company’s risk assessment and compliance program by an independent auditor. The audit is needed to provide the organization with a clear outline of issues requiring urgent attention to ensure regulations are complied with. An independent audit tests the company’s Know Your Customer (KYC) due diligence procedures; employee training; systems for ongoing monitoring and systems for reporting money laundering activities.

All the stages are equally important and pursue certain goals. Combined efforts of legislative power, financial institutions, and AML software vendors can step by step build an effective defensive mechanism against money launderers.

Anti-money laundering regulations. Dura lex, sed lex – the Law is harsh, but it is the Law. 

AML rules and regulatory expectations are constantly evolving, and financial institutions have to make sure their compliance programs keep up with each new change. 

Because money laundering and terrorist financing practices are a latent risk, laws and regulations have been strengthened and regulatory efforts have been focused on preventing and combating such practices. Financial institutions, in particular, must make a greater effort to imply the necessary risk reduction measures and controls. Failure in complying with legal requirements leads to extremely costly penalties and fines, deterioration of the relationship with customers and other financial institutions, imprisonment, and damage to reputation. 

In the EU, for instance, the Fifth Anti-Money Laundering Directive (5AMLD) came into force on the 10th of January 2020. It obliges EU members to bring their legislation in line with the new regulations. Key changes stipulated in the new Directive include:

  • Broadening access to information on beneficiaries, improving transparency in the ownership of businesses.
  • Minimization of risks linked to prepaid cards and virtual currencies.
  • Cooperation between financial intelligence units.
  • Enhanced checks on transactions involving high-risk third countries.

In conditions of AML measures improvement, it is the right moment for financial institutions to think if their security standards correspond to modern challenges and legislative demands. 

To make sure, your company always does, choose the appropriate, reliable and effective software. FICO will provide you with it.


In conditions of AML measures improvement, it is the right moment for financial institutions to think if their security standards correspond to modern challenges and legislative demands. To make sure, your company always does, choose the appropriate, reliable and effective software.

Truly, AML software tools are available today. And the best ones are end-to-end, relatively inexpensive, and relatively easily integrated into existing systems. 

Think and decide, whether additional precautions are an overreaction or not. But bear in mind that your company’s safety is a top priority goal. Read Part Two of our article “Anti-Money Laundering Solutions: The Digital Great Wall Of Fintech“to understand how AML solutions can provide your company with extra security. 

When we speak about FICO, we do not only mean software for banking industry. Decision making process is crucial for any business. Read our article “FICO Blaze Advisor: the compass of your business decisions” to understand benefits of automated decision making process.

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