The need to follow Anti-Money Laundering (AML) is increasing day by day and it is becoming important to perform AML checks continuously. But even while doing so many businesses end up making mistakes that become costly for them. Continue reading to find out the 8 most common errors they make during AML checks.
- Not Understanding AML Surfing
One of the biggest mistakes they make is not completely understanding what is AML smurfing and how it can bring about problems. Criminals like money launderers use this technique to break down huge transactions into pieces so they can bypass detection systems. There are several tiny transactions made instead of making one big one. Understanding the signs of AML smurfing is quite important to perform effective AML screening.
- Failure to Implement AML Solutions
Putting money into AML solutions is very important for making the entire process of compliance smoother to reduce the chances of errors. AML solutions like transaction monitoring, screening customers, and even risk assessment are helpful. This is because these solutions make the manual processes automated and also identify suspicious activities quickly. Therefore, it is also important to opt for a solution according to what your business requires.
- Ignoring Customer Due Diligence (CDD)
Client An expected level of investment or CDD is an incredibly crucial piece of AML consistency When organizations are not aware of it they end up uncovered to cash laundering-like crimes. CDD is all about verifying and confirming the identities of people, looking at their risk profiles, and also keeping an eye on transactions that may be suspicious. This helps in finding people who carry high risk. When a business does not do CDD, it can get penalized.
- Over-Reliance on Automated Systems
Even though automated AML screening tools can turn out to be helpful, they can at many times lose their effectiveness if there is no human oversight. Therefore, making use of just automated systems can also result in missing out on important warnings. Moreover, they can also raise false positives and may also not be able to detect criminal schemes. Businesses need to have staff ready who can look into the alerts generated by AML systems and perform investigations.
- Inconsistent Monitoring
Monitoring transactions regularly is important for recognizing activities that may be suspicious. When businesses are unable to monitor transactions they may miss out on important signs of warning. This helps in checking transactions for unusual patterns that may go undetected if monitoring is not done.
- Failure to Update AML Policies and Procedures
There should be proper and effective communication between different departments when there is no clear communication, many important details may be missed out on. The departments responsible for AML checks, such as legal and risk management, need to work together and be on the same page. There should be meetings, updates over emails, and even sessions for training so they are up to date with the recent happenings.
- Neglecting to Report Suspicious Activity
Failing to report suspicious activities to the authorities can cause serious problems. There should be reporting done immediately to make sure that no activities are leading to money laundering. Businesses must report suspicious activities to agencies and higher authorities. When individuals report these activities on time, authorities can investigate and eliminate them.
Way Forward
Taking everything into account, businesses and financial institutions need to avoid these mistakes if they want to make their anti-money laundering compliance efforts more effective. Investing in employee training and smart automation significantly reduces money laundering. By doing so businesses can protect themselves from examination by authorities, damage to their reputation, and even huge financial losses.
