Money laundering is considered an offense with serious repercussions for a company that could last for years. Sometimes, criminals offer small business owners an opportunity that they can’t refuse. As they perceive it to be easy money, they accept it and become a means for money laundering. Acoording to a report, money laundering costs $1-$2 trillion annually all over the world. Anti Money Laundering regulations are improving day by day in order to protect financial organizations from being a victim of fraud.
The regulatory authorities implement these standards in an effort to stop the funding of terrorism, corruption, and money laundering. With the rise of technological advancements, insurance companies, banks, and other financial organizations are facing a number of challenges in adapting to change. Additionally, while digital onboarding streamlines financial operations, criminal threats are also growing at the same time. According to Shufti Pro Funding, there is an urgent need to implement effective AML solutions to combat these challenges.
Importance of Digital AML Compliance
The following five reasons demonstrate the significance of a robust AML compliance program.
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Applying Regulatory Fines
AML-related enforcement actions have become more prevalent. Since 2009, regulators have imposed around $ 32 billion in fines related to not implementing AML solutions all over the world. These fines are an efficient way to control money laundering and other financial scams.
- To Control Crimes:
Criminal tactics have significantly improved and are now challenging to stop. There are three types of criminals based on their crimes. The first type of criminal sells stolen vehicles and weapons at a low-cost. They are difficult to find, and the response time of authorities is crucial. The second category consists of cyber criminals. These criminals take advantage of technological flaws. They employ cutting-edge technology and access confidential data. E-commerce criminals are the third and final category of criminals. E-commerce has significantly flourished during the COVID pandemic. Therefore, it is simple for criminals to pose as online retailers or payment processors. Modern AML solutions successfully combat all three categories of criminals.
- To Protect Reputation:
Getting a good reputation in the business sector is very difficult. It is why, financial institutions are more concerned about it because they are established brands. Any AML security breach can have a negative impact on their reputation. Brand values are extremely high due to the huge market volumes. Anti money laundering laws can help businesses become more well-known so that customers perceive them as trustworthy.
- To Manage Expenses:
In general, traditional AML monitoring services demand manual staff to work. This effort makes operations ineffective and challenging to scale. About $23.3 billion was spent by US financial services in 2018 to reduce the risk of money laundering. AI-powered AML systems require only one-time installation fee and are ready to use after that. It does not require a huge staff, which saves time and money.
- Better Customer Experience:
The AML compliance process should be so effective that it can provide quick services to clients. In today’s digital world, the slow speed of online shopping and communication makes the customer experience worse. 1 out of 3 financial institutions has lost potential customers because of ineffective or lengthy onboarding procedures. Digital AML compliance program can speed up the onboarding process and make the customer experience better.
How’s a Robust AML Verification System Look Like?
With the rise of financial crimes, it is necessary for a company to implement an updated anti-money laundering system. Ineffective and outdated AML screening systems can lead to severe consequences like financial penalties and imprisonment. Below are the 3 qualities that make an effective AML system:
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Cutting-edge Technology
A robust AML solution ought to provide a wide range of functionalities. These qualities include real-time analysis, transaction monitoring, proactive alarms for fraud transactions, and details on suspect nations. The automation in anomaly detection enables the platform to filter suspicious transactions through significant events and proactively send alarms.
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Simple Interface:
However, if the data analysis is complicated, all these functionalities won’t be very useful. Businesses should use AML solutions that include simple dashboards and present the data in a clear and understandable manner.
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Adaptability and scalability:
As per Shufti Pro News, scalability and flexibility are critical for a strong anti-money laundering system. One reason is that laws are constantly changing, and another is that criminals constantly come up with inventive ways to harm people.
Conclusion
Every financial company needs an AML compliance program in order to adhere to regulatory requirements. It should include ongoing monitoring, suspicious activity detection, CDD, and other similar features in accordance with the global AML security measure. For this reason, organizations should use digital AML solutions for efficient screening and financial crime mitigation. Financial institutions can eventually stop money laundering, corruption, and other threats.