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The Ultimate Guide to Anti-Money Laundering (AML) Checks
Customer Due Diligence
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The Ultimate Guide to Anti-Money Laundering (AML) Checks

Anti-Money Laundering (AML) checks are part of the Customer Due Diligence (CDD) process in which regulated businesses are required to prove that individual and corporate clients are who they say they are.

Anti-Money Laundering (AML) is part of the Customer Due Diligence (CDD) process in which regulated businesses are required to prove that individual and corporate clients are who they say they are.

What is an AML check?

AML checks specifically are in place to prevent money laundering and transfer of illicit funds through a business. As of 2022, an estimated £88 billion is laundered in the UK every year so countering and reducing this figure is at the forefront of priority. Businesses in industries such as financial services, online gambling, cryptocurrency, and regulated commerce are required by law to conduct AML checks outlined in various global regulation set out by regulators including the Financial Conduct Authority (FCA), BaFin, the Securities Exchange Commission (SEC), and more.

By implementing a robust Anti-Money Laundering program, businesses can identify Politically Exposed Persons (PEPs) who may pose a higher risk of laundering money, sanctioned individuals, and adverse media checks on individuals and businesses. AML checks not only prevent money being laundered through a business but also prevent fines, suspensions, and reputational damage by ensuring that businesses aren’t working with bad actors.

Types of AML checks

There are several checks included to comply with AML requirements, ensuring that businesses are doing everything they can for effective Anti-Money Laundering, Counter Terrorist Funding (CTF), and financial crime prevention.

PEP checks

A Politically Exposed Person (PEP) is someone who holds a position of power and is therefore more susceptible to money laundering or bribery. Examples include heads of state, government officials, judges, and military officers.

PEP checks pull data from a variety of global sources to enable regulated businesses to conduct due diligence, ensuring they are not involved in any illegal activities. If a customer attempting to onboard is a PEP, this doesn’t necessarily mean that the business should automatically reject them, but instead they should take a calculated approach to find out more information from said customer.

It’s also important to verify the identity of those associated with PEPs including family members and close associates who could be equally exposed to the potential risk of money laundering as PEPs themselves.

Robust PEP checks will be able to discover information on PEPs, associates, and family members globally and in real-time.

Sanctions checks

Sanctions are measures imposed by governments or international organisations to restrict financial transactions with certain individuals, organisations, countries, entities, and vessels. Sanctions can be imposed for a variety of reasons including terrorism, human rights abuses, weapons proliferation and more.

Sanctions checks are designed to identity anyone or anything which has been sanctioned globally. Employing sanctions checks can be argued as more important than PEP checks as it is prohibited in a variety of regulation to do business with those who are sanctioned.

There are a variety of sanctions lists available including the European Union, United Nations, HMT (His Majesty’s Treasury Department), and the US Treasury Department.

Interested in learning more? Check out our complete guide to PEPs and sanctions here.

Adverse media checks

Adverse media checks scrape open-source information from around the web to report on activities from businesses and / or individuals which may pose a risk to a working relationship. Whilst adverse media can pull information which isn’t necessarily relevant to due diligence, it can also be used effectively to supplement PEP and sanctions checks to form a more robust AML process.

Transaction monitoring

Transaction monitoring occurs post onboarding and is a systematic process that involves scrutinising financial transactions to identify suspicious activities related to money laundering or terrorist financing. Providers of transaction monitoring, including FullCircl partner Comply Advantage, use advanced algorithms and pattern recognition to track transactional behaviour such as frequency, amount, and unusual patterns to identify the risk of money laundering from current customers.

AML as part of a wider KYC program

As AML regulations globally continue to become more stringent coupled with rising expectations from customers to complete onboarding more efficiently, combining Know Your Customer (KYC) and AML is becoming increasingly critical to business growth.

It's no longer fit for purpose for regulated businesses to have a fragmented approach to compliance leading to the popularity of providers who can offer a full compliance stack has risen exponentially in the past decade. For example, AML in banking has traditionally been a manual approach but even those reliant on legacy systems are turning to technology and AI to increase the efficiency of compliance teams.

For many regulated industries, just performing anti money laundering checks isn’t enough to comply with regulatory requirements. Instead, it’s required to not only verify that customers aren’t politically exposed or on sanctions lists, but to also verify the identity of customers with KYC checks, document verification, and anti-fraud measures.

Although, as the list of AMLKYC checks required to complete onboarding gets longer year on year, the risk of customer drop-offs due to clunky onboarding continues to rise.

Regulated industries are now putting more emphasis on the compliance program at the forefront of priority, ensuring they partner with technology providers who can offer them all of the checks they need whilst delivering the checks seamlessly to achieve real-time onboarding.

What data is required for AML checks?

Depending on the context around performing AML checks, a variety of personal information is required to best find a match. When performing AML checks on individuals at the point of account opening, the following information is required at a minimum:

  • Name
  • Address
  • Date of birth

If the business is using an AML provider who is pulling multiple sources of AML data and can confidently access name, address, and date of birth from their customers then this information will suffice in finding an accurate match.

However, it’s not always as easy to receive this information from customers so businesses can supplement this with asking for an official identity document such as a passport, driving license, proof of residence, or source of funds to assist in the process.

Advanced AML providers will also offer the option to implement customisable matching thresholds which will allow compliance teams to investigate multiple results. For example, a business might want to receive an alert if the name and date of birth match, but address is misspelled. This ensures that businesses lower the risk that falsely inputted data leads to missed matches.

In the context of performing AML checks on businesses or directors associated with businesses then there is more information to be collected before an accurate check can be made.

Again, stressing the importance of using a system designed to offer a full suite of compliance tools, verification of corporate customers should include a Know Your Business (KYB) check in the first instance. This will ensure that the AML checks are performed on the correct entity, similar to how a KYC checks ensures the right individual is being checked but will also provide initial indication into risk by analysing financial information and share structure.

Once the KYB report is performed, an accurate AML checks can then be used on both the business itself, related shareholders / directors, and most importantly, the Ultimate Beneficial Owner (UBO).

What systems support AML checks?

It’s not only critical to identify the correct information needed to effectively perform AML checks, but also that the system powering the checks can support accurate identification and efficiency.

Client screening tools such as FullCircl allow regulated businesses to perform AML checks seamlessly at the point of onboarding and through ongoing monitoring. This means that clients of FullCircl use AML checks on all of their customers at the point of onboarding without requiring manual collection of data.

A single API integration can perform AML checks automatically when a customer attempts to onboard and ongoing monitoring can be performed on customers which includes the ability to categorise clients by risk group.

The regulation from the Financial Conduct Authority (FCA) and other associated entities requires AML not only at the point of onboarding but also proactive use of AML where there is a risk of terrorist financing, money laundering, suspicious behaviour, and transactions exceeding the threshold of 15,000 (USD, EUR, GBP). Therefore, AML at the point of onboarding is only one part of the puzzle, active monitoring of clients is just as important to identify risk and avoid the potential of money laundering.

How long do money laundering checks take?

This entirely depends on the systems used to consume AML data. Manual verification can take anywhere from a few hours to a few weeks depending on the risk level of the subject. Automated AML solutions can perform checks in seconds by aggregating multiple sources of data into a single access point.

There are many different sources of data in a comprehensive AML check meaning that any businesses who are required to implement an AML program should conduct in-depth analysis of both the data required to comply with regulations and the technology providers who can deliver the checks to an industry leading standard.

How FullCircl can help

FullCircl provides a full suite of AML screening and monitoring including global PEPs, sanctions, and adverse media to actively identify the risk of money laundering at onboarding and through ongoing monitoring.

FullCircl is designed to remove the regulatory and verification roadblocks to drive revenue growth by providing a full IDV orchestration platform including KYC in 160+ countries, document verification with facial comparison, Know Your Business checks, anti-fraud, and more. FullCircl pulls data from 20+ global sources to ensure that the best quality of data is provided to clients whilst ensuring that onboarding is aligned to rising customer expectations.

Clients use FullCircl to keep ahead of evolving regulation whilst giving their customers the best possible onboarding experience to drive customer advocacy and revenue growth.

Interested in hearing more? Contact us today for a free demonstration and learn how to access FullCircl's AML integration.