What is an anti-money laundering (AML) compliance program and what are you required to do?

To combat money laundering, terrorist financing and other financial crimes, it is critical for your business, company, organisation or entity to develop an anti-money laundering compliance (AML) program.

An AML program specifies how the reporting entity identifies, mitigates and manages the risk of its business being misused to facilitate money laundering or terrorism financing. It ensures an entity is capable of detecting financial crime risks like money laundering, bribery, fraud and tax evasions.

An effective AML compliance program should focus on effective systems and controls which are able to detect financial antimony laundering activities. It should also be capable of scanning potential risks associated with the clients who you interact with. An AML program should be developed on deep regulatory understanding and regularly overseen by AML experts, who are able to ensure the compliance at every level of the organisation.

What are the core components of most AML programs?

• Commitment to AML compliance from the top: Board and executives should be dedicated to ensuring every person in the organisation take compliance as part of their responsibilities.
• Internal policies, procedures, and controls: The internal controls and systems should effectively detect and report financial crime. Additionally, a review should be conducted regularly to measure the effectiveness in meeting the compliance requirements.
• Know Your Customer (KYC) Program: A KYC program is a set of procedures that are gathering information of clients and designed to know the true identity of individuals. It should not only be conducted during the on-boarding process but should also be accessed regularly.
• Designated AML compliance officer: The duty of an AML compliance officer is to oversee the general implementation of AML policy within the organisation. The role is to communicate with authorities, auditors and senior management, and making AML policy recommendations based on audits.
• Ongoing training program: Training employees who each have responsibilities for compliance reporting, information gathering and following elevation procedures is critical for an effective AML program.
• Independent audit: Part of an AML program is to have independent assessing and auditing by third-party organisations. It may be conducted by an internal team which is independent of the AML function in large corporation.The audit should be mandated and conducted at least every 1 to 3 years.
• Anti-Money Laundering Program Manuals: Having completed the money laundering and terrorism financing risk assessment, you are required to create and maintain an AML Program Manual, documenting the systems, procedures, and controls that you have in place to mitigate and manage the identified risks.

Documenting an AML Program Manual that is appropriate and proportionate to your risks, as well as containing all of the expected sections and content, to the level of detail expected by your AML regulator often presents a significant challenge for regulated businesses.

Click here to find out if your business needs an AML program and about how you can get compliant today.