How to Set Up an AML Compliance Program

The number of organizations regulated by AML mandates is growing by the day. For established financial institutions, it’s simply a matter of keeping up with the latest rules and regulations, such as the 2020 Anti-Money Laundering Act. For other businesses that are new to compliance, it can be a minefield.

Let’s explore what AML compliance programs are, what makes them successful, and how you can deploy yours today.

What Is an AML Compliance Program?

An AML (anti-money laundering) compliance program establishes every step a company takes to meet regulatory AML requirements. It includes risk management, operational strategy, training, internal policies, and reporting. 

The goal of an AML compliance program is to ensure regulatory compliance with government mandates, reduce the risk of fines, and ensure criminals do not launder money through your business.

A key challenge of AML compliance programs is that AML regulations vary from one jurisdiction to the next, not to mention the fact that it requires continuous monitoring, such as when it comes to doing a PEP check of your customers.

Who Needs an AML Compliance Program?

The type of organization that must meet AML requirements varies from one country to the next. However, the most common types of regulated businesses will include those dealing with customer funds, such as:

• banks, neobanks, and fintech companies
• securities broker-dealers
• insurance companies
• mutual funds
• lenders

There has also been a push for other types of companies, such as iGaming operators and online casinos, to meet AML requirements. In the UK, for instance, you may also be required to be AML compliant if you are one of the following:

• high-value dealership
• estate agent or letting agency
• art market participant

In short, if the brick-and-mortar version of your business is cash-based or deals with large amounts of money, chances are that the online version will be treated with suspicion by regulatory bodies.

The 5 Pillars of an AML Program

Let’s now go over a list of the steps you could go through in order to plan, develop and launch your company’s AML compliance program. You may also want to look at our AML checklist to get a better understanding of the strategies mentioned below. 

1. Designate a Chief Compliance Officer

Companies may have different titles for the person who is in charge of compliance. Head of Compliance, Chief Compliance Officer (CCO), AML Compliance Officer (AMLCO), or even Money Laundering Compliance Officer (MLCO). Note that the term compliance here may also refer to regulations regarding health and safety, data protection, modern slavery and human trafficking, or even whistleblowing.

However, what does not change is their multifunctional responsibility. In essence, the position is designed to be a point of contact between your company and auditors, which means they should handle – or at least have a clear view of – everything from internal audit management to policy writing, employee training programs, or risk analysis.

They should have knowledge of regional compliance and an expert understanding of the company’s business model while also maintaining a certain level of independence. The role may see them managing the AML budget, reporting to the board, or regularly auditing the company.

Note that for smaller businesses, the role may be taken on by a risk management expert or even the legal department. But the larger your operation grows, the more challenging it becomes to stay abreast of the changing laws and regulations.

2. Perform Risk-Based Analysis

The term risk-based analysis is vague by design. Regulators understand that money laundering is best dealt with through a stochastic approach, which is why your company is more or less in charge of defining risk. 

However, there are key questions your AML program should aim to answer:

• Is our business likely to be used for money laundering? And if so, how?
• Who are the customers or partners most likely to commit these crimes?
• How can these individuals be monitored and reported to authorities if necessary?
• What steps can we take to ensure these high-risk individuals do not work with us?

In most scenarios, all of the above questions will be answered by monitoring names on government-issued AML databases, performing internal audits, and deploying transaction monitoring. More on that later.

The crucial part is that you should analyze risk and develop adequate internal policies and procedures to mitigate that risk.

3. Train and Educate Your Employees 

AML may be the last thing on your employees’ minds during day-to-day operations, but it doesn’t have to be. During employee training sessions, vigilance regarding risk should be rewarded, or at least explained. While only you can know your specific AML risks, a good employee training program may take many forms that might include:

• staff meetings with regular updates about evolving AML rules and regulations
• educational webinars or presentations
• documentation offered as part of the employee onboarding package

It doesn’t have to be specifically about AML either – most of the knowledge can be shared along with training on know your customer (KYC) and customer due diligence (CDD), for instance.

4. Deploy AML Software 

AML software will let you automatically check names against sanctions and watchlists but also export data for your suspicious activity reports (SARs). This can take away a lot of the burden of manually checking lists of politically exposed persons or close relative and associates (RCAs), among others.

The best solutions will also include features designed to enable transaction monitoring, alerting you if a customer goes above the set AML thresholds for spending or purchases.

Deploying a third-party AML solution always comes at a cost: paying per API check or integration time and developer resources. What you gain, however, is a turnkey solution to control and monitor AML as part of your risk-based management strategy.

5. Perform Regular Internal and Independent Audits

While some jurisdictions force companies to carry out independent audits regularly, others are less hands-on about these kinds of controls. Regardless, it is a good idea to regularly go over your entire list of AML policies, training, and reporting systems – in an effort to rate how effective you believe it to be.

If you have experience with a real government audit, you’ll probably already be familiar with how robust you must be in your approach to collecting, reviewing and rating procedures. However, even without that kind of experience, there is enough information available online to make the process less daunting.

How SEON Can Help With Your AML Compliance Program

As a fraud prevention solution, SEON’s technology already helps organizations of all sizes mitigate the risk due to identity fraud and payment fraud. In short, these features let you get a better understanding of who your customers are and how they pay – ideal in the context of customer due diligence (CDD), KYC, and transaction monitoring.

But our AML API is also specifically designed to let you perform the right screening with minimum friction. This allows you to:

• ensure AML compliance
• reduce the costs of AML
• break down silos between KYC and AML
• help you build you AML toolkit
• help you manage risk with the right software

All of the above is available for free with up to 2,000 API calls. Higher volumes are billed on a pay-per-API-call basis, giving you complete control over scaling and spending. Get in touch to learn more about how SEON’s AML API could help your compliance program today.

Sources

• Gov.uk: Who needs to register for money laundering supervision
• Fincen: The Anti-Money Laundering Act of 2020