The concept of anti-money laundering (AML) refers to the laws, regulations, and procedures that aim to prevent criminals from disguising illegally acquired funds as legitimate sources of income.
Criminal activities such as market manipulation, trade in illegal goods, corruption of public funds, and tax evasion are targeted by AML laws and regulations, as well as the methods used to hide the proceeds of these crimes.
There is a difference between anti-money laundering (AML) and your cus (KYC) rules. In banking, KYC rules govern how institutions must verify their clients' identities. AML is a broader concept: it refers to the measures that institutions take to prevent, detect, and combat money laundering, terrorism financing, and other financial crimes.
Anti-Money Laundering – Controls
Countless governments, financial institutions, and businesses take steps to prevent money laundering. Governmental criminalization is the most common. The United Nations Convention Against Transnational Organized Crime established guidelines that can help governments prosecute those involved in money laundering schemes.
Know Your Customers
For financial institutions to prevent money laundering, they must also have "know your customer" policies.
KYC procedures are used by institutions to positively verify their customers' identities as well as that of beneficial owners, while also conducting further checks like PEP and adverse media screening.
It is important for institutions to know who their customers are and understand what risks they may potentially pose.
Additionally, institutions use various tools to monitor their customers' behavior and transactions, this practice is known as KYT's "Know Your Transaction", KYT plays a crucial role as part of the ongoing monitoring of the business relationship in order to identify and flag suspicious transactions and behaviors.
Record Keeping and Software Filtering
Businesses and financial institutions are required to keep complete, detailed, and accurate records as part of their AML obligations. Records that are kept will include customer identification practices and transactions etc.
As technological advances continue, more and more accurate methods of spotting money laundering activities are available.