What Is AML Screening & Why Is It Important?

Every year, financial systems worldwide lose between 2–5% of global GDP to money laundering — that’s an estimated US$ 800 billion to 2 trillion flowing through illicit channels. The hidden risks aren’t just numbers for governments: for businesses, failing to detect them early can mean serious regulatory penalties, reputational damage or even business closure.

That’s where AML screening comes in. It’s the first line of defense, verifying identities, cross‑checking against watchlists and flagging potential risk before onboarding. In this article, we’ll explore what AML screening is, how it works, why it matters for your organization and how you can stay compliant without compromising customer experience.

What Is AML Screening?

AML screening is the process of verifying customer identities and checking them against sanctions, watchlists and other high-risk indicators to assess their potential involvement in money laundering. It’s a foundational part of any AML framework, typically carried out during onboarding, to prevent financial crime before it enters your system. While approaches vary by region and industry, the goal is universal: identify risky individuals early to ensure compliance and protect your business.

Main Types of AML Screening

AML screening isn’t one-size-fits-all. Depending on the risk level, geography and regulatory requirements, businesses should screen customers against a variety of data sources. Below are the most common and essential types of AML screening used to identify high-risk individuals and ensure regulatory compliance.

1. PEP Checks

Politically Exposed Persons (PEPs) include individuals in prominent government or public roles, along with their close relatives and associates (CRAs). Their position and influence can increase the risk of bribery, corruption, and exposure to financial crime. PEP screening helps identify these individuals early so businesses can apply enhanced due diligence where needed and assess the broader risk posed by their networks or associations

2. Sanctions Checks

Sanctions screening involves verifying individuals or entities against domestic and international sanctions lists issued by regulatory bodies (e.g. OFAC, UN, EU). These lists include those flagged for activities such as terrorism, organized crime or threats to national security. Some individuals may be sanctioned indirectly through ownership structures or close ties, which is why beneficial ownership checks and OFAC’s 50% rule are critical to compliance.

3. Crime and Watchlist Screening

The process flags individuals associated with known or suspected financial crimes or those appearing on global watchlists. Crime lists cover fraudsters, money launderers and other financial criminals, while watchlists often extend to terrorism financing, trafficking or politically sensitive investigations. Since these databases are frequently updated, screening systems should reference them in real time to avoid missing newly added risks.

4. Payment Screening

Payment screening focuses on verifying transaction data in real time to identify potential compliance risks or financial crime indicators. It involves cross-referencing payment details, such as sender, recipient,and transaction metadata, against sanctions lists, embargoes and risk databases. This type of screening is especially critical for cross-border payments and high-value transactions.

To stay compliant and reduce friction, organizations can integrate a flexible, low-latency payment screening solution to catch risky patterns before funds are processed. For a deeper look, explore our detailed payment screening guide.

5.  Adverse Media Screening

Adverse media screening involves checking public news sources, articles and reports for any negative coverage that may indicate a higher risk of money laundering, fraud or other financial crimes. Unlike structured watchlists, adverse media relies on unstructured content from global media, helping organizations detect red flags that formal databases may miss.

For example, a financial institution conducting due diligence on a new client may find a recent article linking them to a fraud investigation, even though they don’t appear on any criminal or sanctions lists. This early warning allows for more informed decisions and proactive risk management. 

By including adverse media in their AML strategy, businesses strengthen their compliance efforts and enhance reputational risk protection.

The Objective of AML Screening

The chief objective of AML screening is to detect and combat illegal transactions and other activities, including money laundering, terrorism financing and fraud. AML screening is usually administered as a customer is onboarded to better prevent illegal activity before it can even take place.

In addition, AML screening is also administered out of necessity, not just ideality. It exists as a form of regulatory compliance to ensure that individuals and organizations follow AML laws and regulations.

At a more granular level, the objectives of AML screening include:

• offering safety, security and peace of mind to all entities in the process, such as individuals, organizations, customers and prospective customers
• protecting the reputation of any entities that carry out their AML screening operations
• ensuring the information applied to the AML checks is kept up-to-date, so companies can stay compliant with evolving legal mandates as entities are added to relevant sanctions lists

A working AML compliance program should address these micro and macro functions of AML screening processes to fundamentally ensure financial stability, security, trust and organizational intelligence and compliance.

The Importance of Conducting Proper Screening

Conducting proper AML screening is crucial because it helps to achieve valuable business metrics such as:

• ensuring the safety and overall security of your organization and its customers
• maintaining your compliance with AML regulations, improving reputation and dodging noncompliance punishments
• being a contributor to the international effort to combat money laundering, terrorism, and organized crime by curbing it on your own domain and adding to the international crime-fighting knowledge base

In other words, those who conduct the proper anti-money laundering processes are more likely to bring further safety, efficiency and AML intelligence to individuals, organizations and even nations.

After all, it is important to remember that the AML screening processes that you have at your disposal are not just the product of authorities who have reported suspicious behavior. They are also the product of individuals and organizations, big and small, who carry out their own routine checks, including those related to customer due diligence (CDD), KYC and so on.

The Consequences of Not Doing AML Screening

Those who do not perform AML screening will not only make their organization more likely to be targeted by money launderers, but they will risk facing fines, audits, and damaged reputations as a result of their oversight and/or negligence. Particularly egregious offenders may even find themselves named on an AML-associated list themselves.

Organizations of all shapes and sizes that are obligated to carry out AML screening should do so, but the more established businesses that fail to do their anti-money laundering checks may face harsher penalties. All in all, the phrase, ‘The bigger they are, the harder they fall’ springs to mind!

How Can SEON Help with AML Screening

SEON acts as your unified command center for fraud prevention and AML compliance, bringing together customer screening, transaction monitoring and risk scoring in a single, scalable platform. Its API-first approach enables seamless integration with existing workflows, allowing teams to screen individuals in real time against global sanctions, PEP, crime and adverse media lists. SEON also enriches user profiles with 900+ digital signals, from device and IP data to behavioral patterns, helping you detect risk from the first point of contact. With adaptive machine learning and a flexible rule engine, SEON reduces false positives while keeping you aligned with evolving regulations. As your business scales or shifts markets, SEON ensures your AML framework stays efficient, compliant and customer-friendly — all from one centralized system.

AML Related Articles

• What Is AML Transaction Monitoring & How to Set It Up
• AML Verification: How to Not Get Fined
• Fraud Insights in AML Investigations: Effective Strategies for Compliance
• Top AML Software & Tools in 2025

Sources

• Veriphy: What is a Politically Exposed Person?
• Sanction Scanner: What is Watchlist Screening?

Frequently Asked Questions