AMS filtering is an important tool in combating monetary crime, according to the claim that the money laundering percentage is 2-5% of worldwide GDP. This calls for AML screening because it helps in separating suspect patterns as well as tracking transactions. first, AML screening increases the ability of the financial system to prevent fraud and other financial crimes by incorporating advanced technologies such as artificial intelligence and machine learning. Landing on this blog, you will learn more about the importance of AML screening in detecting money laundering.
What is AML Screening?
The procedure a business must follow to evaluate each customer’s potential risk of money laundering is known as an AML screening process. It functions by confirming a client’s identification while they are being onboarded. Additionally, it entails cross-referencing the client with pertinent databases and lists, including watchlists, politically exposed person lists, sanctions lists, and more.
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Types of AML Screening
Politically Exposed Persons (PEP) Screening
PEPs are individuals in high-ranking political positions, as well as their families and close associates. Because of their influence and power, they are considered vulnerable to economic crime. Identifying PEPs helps develop more accurate risk profiles and implement new risk management strategies. However, because PEPs are defined differently by the government, it is often necessary to check multiple databases.
Sanction Screening
Sanctions lists include individuals and entities affected by government sanctions. These lists typically contain names, aliases, birthdates, and identification numbers. OFAC, the Department of State, and the Department of Commerce maintain major lists in the U.S. International lists come from organizations like the United Nations and the European Commission. Failing to check these lists can result in hefty fines and legal consequences.
Adverse Media Screening
Online Business Adverse media checks involve searching for negative news about a customer that might indicate a higher risk of financial crimes. This includes searching news, internet, and media databases for mentions of the individual with keywords related to financial misconduct. Automated tools are often used for these checks due to the time-consuming nature of manual searches. Adverse media checks complement other AML checks by providing additional context about the individual’s risk.
Watchlist Screening
Watchlists screening checks suspected criminals, terrorists, and money launderers. These lists help prevent financial crimes and terrorism financing. They include details like names and aliases and are maintained by various law enforcement agencies and governments. Key U.S. watchlists are managed by DHS, FBI, and OFAC, among others. International examples include Europol and various national “most wanted” lists.
Who Should Do AML Screening?
In particular, the entities that handle large sums of money should undergo AML screening
- Banks
- Casino and gaming companies
- Mortgage lenders
- Investment companies
- Real Estate
- Stock Trader
- Forex Trading
- Insurance companies
The Importance of Performing AML Screening
A thorough AML screening is important as it helps detect fraud. It ensures the overall safety and security of your organization and its customers. It helps to maintain AML compliance, improve reputation, and avoid non-compliance penalties. It contributes to money laundering detection and combating terrorism and organized crime.
Companies that ignore AML screening increase their vulnerability to being targeted by money launderers and face potential penalties, accountability, and reputational damage for their negligence. However, it is important to remember that the AML screening process you have at your disposal is not limited to authorities reporting suspicious practices but to small and large individuals and organizations conducting routine inspections such as CDD, KYC, etc. Ultimately, implementing a proper AML screening means that the organization contributes to a safe and transparent financial environment, preventing illegal activities and ensuring compliance with regulatory standards.
Conclusion
In summary, AML screening is a must-have practice for financial institutions and various other organizations, which is essential for the integrity of the global financial system It involves rigorous scrutiny of potential clients by name listed to identify risks associated with money laundering and terrorist financing. The four main AML screening approaches address risks, ensuring a comprehensive approach to AML Screening and compliance.
