Anti-money laundering regulation essentially involves firms and other organisations having to identify and prevent handling money and other property derived from criminal activity.
Key learning objectives:
- Define Anti-money laundering
- Identify AML regulation, and the broader more general ruling today for regulated firms and regions
- Explain the penalties if the guidelines are not followed
What is Anti-Money Laundering?
The processes, rules and laws that seek to prevent the handling, depositing, exchange and any other activity relating to the proceeds of illegal activity.
What are some examples of AML Regulation?
- Bank Secrecy Act - 1970s
- Financial Action Task Force (FATF) - 1989
- European AML Directive – 1994
What are the general requirements for regulated firms?
The UK and the US have broader AML requirements that extend beyond regulated financial firms to other organisations that handle financial transactions. The general requirements are:
- To identify parties, they wish to enter into a relationship with
- Requiring firms to identify the source of deposits, payments and wealth of the parties they deal with. They often do this through a combination of information gathering direct from the customer
- Those Regional AML firms that are considered ‘advanced’ from the perspective of AML controls, must also report suspicious or illegal activity
How are these measures enforced?
The most stringent regimes will do the following:
- Punish firms that engage in illegal activity (intended or not)
- Punish individuals if there is a failure to report or act on suspicion
Each individual country and region has its own requirements, and it’s important to check what they are and make sure you're up to speed with exactly what's required of you and your firm.