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Financial crimes pose a huge threat to both financial institutions and their consumers, costing American individuals and businesses billions of dollars every year. While every financial crime can have devastating consequences, one of the most financial crimes is money laundering. Money laundering is the 3-step process of disguising an illegal source of money so that those proceeds seem legitimate. As of 2015, it was estimated that approximately $300 billion is laundered in the United States each year. To combat money laundering, financial institutions must follow certain Anti-Money Laundering (AML) initiatives.
- Financial institutions are particularly vulnerable to financial crimes like money laundering, which can have huge consequences for both consumers and businesses.
- Money-laundering is a financial crime that involves three steps: placing illegally obtained funds in a financial institution, layering (or distancing) them from their real origin, and then integrating them back into the economy using legal transactions.
- One of the ways financial institutions and the government work to prevent money laundering is with Anti-Money Laundering (AML) initiatives.
What is Anti-Money Laundering (AML)?
Anti-Money Laundering (AML) is, as the name implies, any regulations, laws, or policies that work to prevent money laundering. People often launder money that they’ve made from crimes like illegal goods trade, drug trafficking, and tax evasion, which means anti-money laundering laws target other kinds of crime as well.
While there are numerous AML laws and regulations, one of the most important initiatives is the Bank Secrecy Act. The Bank Secrecy Act was passed in 1970 and is primarily aimed at reducing money laundering by requiring financial institutions to help the US government combat financial crimes. The 3 main AML regulations outlined in the BSA require financial institutions to:
- Keep records of cash purchases of negotiable instruments
- file reports of cash transactions exceeding $10,000
- Report suspicious activity that might signify (i.e. money laundering)
An amendment to the BSA also incorporated pieces of the Patriot Act, which require financial institutions to implement a customer identification program in order to comply with the BSA.
What are other Anti-Money Laundering regulations?
While the Bank Secrecy Act was one of the first and most notable AML laws, it is not the only. Since it was passed in 1970, numerous other AML initiatives have been passed that aim to enhance and expand on the AML regulations outlined in the Bank Secrecy Act. Some of the key AML laws include:
- The Money Laundering Control Act (1986). Amongst other provisions, this act established money laundering as a federal crime and outlined further requirements for how financial institutions report suspicious activity and maintain compliance with the BSA.
- Annunzio-Wylie Anti-Money Laundering Act (1992). This act increased penalties for violations of the BSA, required verification and recordkeeping for wire transfers, and established the Established the Bank Secrecy Act Advisory Group (BSAAG), which advises the Secretary on BSA requirements.
- Money Laundering Suppression Act (1994). This law aimed to further encourage financial institutions to combat money laundering by requiring them to review, enhance, and develop greater AML examination and reporting procedures.
- Money Laundering and Financial Crimes Strategy Act (1998). This act required the Treasury and other agencies to develop a National Money Laundering Strategy and AML training. This act also identified geographic areas that are higher risk for money laundering and furthered the High Intensity Money Laundering and Related Financial Crime Area (HIFCA) Task Forces law enforcement efforts on these high-risk areas.
- USA Patriot Act (2001). Created as a response to 9/11, this act aimed to deter financial terrorism and increase money laundering prevention. Though Key AML provisions include criminalizing the financing of terrorism, and expanding the anti-money laundering program requirements, like customer identification and due diligence procedures, to include all financial institutions.
How do organizations maintain AML Compliance?
To maintain AML compliance with these regulations, financial institutions need to implement a strong AML compliance program. While there are a number of different policies financial institutions need to implement to maintain AML compliance, a few key requirements financial institutions must follow include:
- Develop and implement procedures for detecting and reporting suspicious transactions regulated under the BSA.
- Designate an individual responsible for overseeing day-to-day AML compliance operations (aka a compliance officer).
- Provide ongoing BSA and AML compliance training to employees.
- Implement customer identification and customer due diligence policy, which include verifying the identity of customers, understand the nature and purpose of customer relationships to develop customer risk profiles, and perform ongoing monitoring to identify and report suspicious transactions and maintain and update customer information on a risk basis.
How can Tracers help you maintain AML compliance?
Maintaining AML compliance requires accessing effective and reliable compliance tools, and Tracers offers a number of tools that financial institutions can use to maintain compliance.
To help financial institutions implement customer identification programs, Tracers provides reliable and fast identity verification solutions. Tracers ID verification tools will cross-check personal identifiable information, like a name and address, across other records in Tracers database to quickly confirm the accuracy of information and verify the customer’s identity. Tracers also provide watchlist screening so you can identify any customers who are on terror watchlists and avoid working with those customers who are prohibited from participating in your industry.
To further help you maintain AML compliance, Tracers provides comprehensive information including addresses and business records so you can identify customers whose profile makes them a high risk for money laundering. With ongoing monitoring tools, you can get notified of any changes in your customer’s situations that reveal suspicious activity or make them higher risk, helping you maintain AML compliance across the entire customer lifecycle. And with Tracers API, you can easily integrate these tools directly into your own software for easier and faster AML compliance.
If you’re ready to access the best AML compliance tools in your business, get started with Tracers today.