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  • Lilia Harper

AML and KYC Guide

Updated: Apr 19


What is money laundering?


Money laundering is the process of making the proceeds of criminal activities look legitimate. This includes profits from drug trafficking, fraud, and terrorism.


Many money laundering methods involve the financial sector, either knowingly or unknowingly facilitating the return of billions of dollars of illegal money to the legitimate economy. It's estimated to represent 5% of global GDP each year.


The impacts of money laundering are extensive, fueling criminal operations and causing significant economic, security, and social harm. Businesses face financial losses, reputational damage, and erosion of customer trust.

Xertilox checks are instrumental in detecting and preventing these activities.


Do Anti-Money Laundering (AML) regulations apply to my business?


Businesses at risk of being used for money laundering should adhere to AML regulations. Regardless of legal obligations, implementing comprehensive customer checks is a proactive measure to safeguard against fraud, terrorism, and other illicit activities.


Regulated sectors include financial services, legal professionals, accountants, trust and company service providers, real estate agents, high-value goods retailers, and art dealers.


What are the AML regulations?


AML regulations aim to counteract money laundering and terrorist financing by requiring regulated businesses to verify client identities, monitor financial transactions, and report suspicious activities. The 5th Anti-Money Laundering Directive emphasizes the importance of electronic verification.


Professional bodies may offer sector-specific AML guidance, based on current legislation such as the Proceeds of Crime Act 2002 and the 5th Anti-Money Laundering Directive.


What are the requirements for AML checks? AML-regulated businesses have several responsibilities under four main categories:


1.Know Your Customer (KYC) checks: KYC checks identify potential risks among clients, including those with criminal ties or political exposure, through identity verification, customer due diligence (CDD), and enhanced due diligence (EDD) for high-risk individuals.


2.Creating an AML policy statement: Your business must have an AML policy outlining your strategies against money laundering, including process responsibilities, CDD procedures, and staff training on reporting suspicious activities.


3.Internal controls and ongoing monitoring: Implementing controls and monitoring ensures that your business and staff remain vigilant against money laundering, adapting to changes in customer relationships and risks.


4.Record-keeping: Maintaining detailed records of all AML activities is critical for demonstrating compliance and protecting your business during investigations. Records should be kept for five years post-relationship or transaction.


When should I perform AML checks?


AML checks are mandatory at the start of a new business relationship or before any financial transaction. They are particularly crucial when there's a heightened risk of money laundering or terrorist financing, such as with politically exposed persons (PEPs) or clients from high-risk countries.


Why are KYC checks important?


KYC checks are not only regulatory requirements but also serve to build trust and protect your business from fraud, which is vital for both compliance and operational security.

What happens if I don’t perform AML checks properly? Failing to conduct proper AML checks can lead to significant penalties, including financial fines, reputational damage, and in severe cases, criminal charges.


How can technology facilitate AML compliance?


Advancements in technology offer reliable and efficient solutions for AML compliance, enabling online customer verification, reducing manual work, and enhancing fraud protection through innovative methods like AI and biometrics.


Xertilox simplifies compliance processes, saves time, enhances security, allows for remote checks, and scales with your business needs, making AML compliance more accessible and effective.


#FraudPrevention,#SecureBanking,#EconomicSafety,#GlobalFinanceSecurity,

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