Anti Money Laundering (AML) checks – what it is?

By implementing check procedures, banks, and financial organizations can effectively detect money laundering and prevent participation in the crime. AML checks are increasingly important due to the increase in the use of cryptocurrencies in the financial sector. What is AML check? What does it look like, and what purpose does it serve? About it in an article on the checks (Anti-Money Laundering checks).

AML – anti-money laundering checks

Cryptocurrencies are a popular way of making financial transactions. But, at the same time, they pose a risk of money laundering. This practice can be used by criminal organizations attempting to legalize funds from illegal sources, especially drug trafficking, human trafficking, terrorism, or smuggling. This procedure is designed to cover financial traces and make identifying the source of funds challenging.

As a result of the risks, financial organizations are required to comply with regulations in the area of countering the illegal procedure. To protect against potential threats, AML (Anti-Money Laundering) regulations apply. More and more countries are choosing to implement regulations on anti-money laundering controls. The measures aimed to prevent using the financial system to legalize illegally obtained money, report suspicious transactions, and prevent them in the future. 

State legislatures impose mandatory AML requirements on companies – on the one hand, their implementation increases the financial security of operations, and on the other hand, it protects banks and financial institutions from being linked to a prohibited practice. 

What are AML checks? 

Anti Money Laundering checks are procedures put in place at financial institutions to detect and prevent illegal activities, as well as to manage operational risks associated with financial activities. So what is AML check? It constitutes a comprehensive process during which the identity of the institution’s customers is checked, as well as their financial history. The check also involves monitoring and analyzing suspicious transactions that draw attention because of their frequency, amount, or source or have unusual patterns. 

The introduction of AML regulations in the cryptocurrency sector increases its transparency and accountability and protects market participants from fraudulent activities. The Anti Money Laundering checks primarily apply to banks and financial institutions but can also cover other industries – including real estate, professional – lawyers or accountants, and casino operations, which may be at risk of money laundering.

AML checks – when should the check be conducted?

AML checks for companies are aimed at preventing money laundering – the practice of converting illegally obtained funds into legitimate ones by introducing them into financial circulation. Regular checks should be carried out at banks and financial organizations, subject to AML regulations. Financial organizations are required to comply with AML regulations established by regulators. 

Conducting Anti Money Laundering checks are essential to comply with legal obligations and avoid non-compliance sanctions. Implementing control procedures is also essential in protecting the reputation of financial institutions – participation in illegal activities can reflect negatively on the organization’s image. 

Helping with verification is the Coinfirm AML Platform, a tool for data and flexible blockchain analysis and compliance in the crypto industry. Using the platform allows you to gain an in-depth understanding in seconds with more than 350 risk controls and data points, from financial crimes to counterparty identity.

What do Anti-Money Laundering checks consist of?

AML checks are an integral tool financial institutions use to prevent money laundering and possible financing of terrorism.

By verifying customers’ identities, tracking transactions, and reporting suspicious behavior, Anti-Money Laundering checks enhance the security of the financial system. This, in turn, contributes to improving trust in banking institutions and the financial sector as a whole.

The basis of AML checks for companies is to identify the customer by checking their identity documents and confirming the compliance of the information provided as part of due diligence and KYC (Know Your Customer) procedures. One of the critical elements of AML checks is the monitoring of transactions and source of funds using sophisticated data analysis systems to detect suspicious activity, for example, deposits of high frequency or amount or transfers to high-risk countries. AML checks also report questionable activities – any suspicious actions detected during monitoring should be reported to the relevant regulators. This makes it easier for the authorities to catch criminals and combat their money laundering activities. It is also necessary to perform regular audits and keep records about clients and transactions – to conduct audits and improve possible investigations.