Anti Money Laundering (AML) are activities done by financial institutions to ensure that cases of money laundering and other financial crimes are prevented from happening. This is done with the use of technological systems to trace financial accounts that are used for money laundering. This article promises to give you a full gist of what anti money laundering finance is all about and what you should know.
What is AML in banking?
Anti Money Laundering (AML) refers to cases where money stored in bank systems is prevented from being used for fraudulent activities. This prevention is governed by a set of laws and policies that are targeted at recovering money kept to be laundered. These anti money laundering policies are being used day-to-day by individuals, businesses, and institutions to prevent crimes. Some examples of anti money laundering are Know Your Customer policies, Customer Due Diligence (CDD) among others.
Anti money Laundering Act
Anti Money Laundering Act are part of the Bank Secrecy Acts that govern operations in banks. This AML policies are governed by AML/CFT Priorities (AML Act Section 6101).
In addition, this Act is enforced and excited by the FinCEN body. This happens in such a way that when a person or business violates the AML act, the FinCEN is legally backed to address such suspicion. They do this by accessing such bank accounts and taking proper action if such accounts are found to contain laundered money.
Types of AML in banking
Below are the various types of Anti Money Laundering in banking:
1. Transaction Monitoring
This type of AML policy monitors transaction records in banks. The technology is designed to look for patterns that suggest that money is being laundered and raises alert. It is used in many financial institutions around the world.
2. Customer Due Diligence (CDD)
This is another common AML system. With the CDD policy carried out, the identity of a customer is thoroughly examined. Customers of financial institutions are obligated to provide personal information and details about themselves to the bank. The information provided would determine to what level a customer should be monitored for possible money laundering.
3. Name Monitoring
The Name Monitoring system of AML uses a customer’s name to run checks in the overall banking database. These checks are done to match similar names and records of these names. If a customer’s details match another’s details, then the investigation is done.
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4. Negative News Screening
In this AML approach, a customer’s name and details are searched across various news networks, articles, and other publications for any negative record. If a customer’s name appears to have a negative record, the system immediately provides AML technology to monitor such accounts.
FAQs
What is AML and its types?
Anti-Money Laundering are policies, and regulations made to prevent financial crimes and illegal activity by customers. These policies are established all over the world’s financial institutions to prevent fraudulent activities.
What are the three stages of AML?
The three stages of AML include:
• Placement.
• Layering.
• Integration.
What are the three common types of money laundering?
The common types of money laundering techniques are usually smurfing, the use of casinos, shell companies, and trade-based laundering.
What are the different types of AML checks?
The different types of AML checks include:
• Transaction Monitoring
• Customer Due Diligence (CDD)
• Negative News Screening.
• Name Monitoring.
Conclusion
You’ll agree that Anti Money Laundering is a new approach to finance. It has helped prevent fraudulent cases of money laundering on a federal and local level. Thanks to this article, you’ve been able to see the different types of AML and why it has been implemented. Kindly use this information for educational purposes only!