FAQ's

AML FAQ's

What is AML and why is it important?

Anti-Money Laundering (AML) is the series of systems, controls, processes and procedures that governments and businesses put in place to identify and prevent money laundering.

 

Money laundering is a financial crime. It involves taking proceeds that have been obtained from a criminal source (also known as ‘dirty money’) and disguising its origins so that it appears to have been acquired legitimately.

 

Money laundering allows criminals such as drug gangs and human traffickers to expand and benefit from their operations. Examples of money-laundering offences include tax evasion, theft, fraud, bribery, corruption, smuggling, modern slavery, human trafficking, drug trafficking and illegal arms sales.  

Governments across the world are keen to clamp down on money laundering to stop the funding of such criminal activities.

Do different industries, such as banking, gambling and real estate, have different AML requirements?

The UK anti-money laundering legislation is dictated by the Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000 and the Money Laundering, Terrorist Financing and Transfer of Funds 2017.

 

These laws set out which businesses fall under the Money Laundering Regulations. All businesses that fall under the Money Laundering Regulations need to introduce and maintain an Anti-Money Laundering (AML) programme.

 

There are over 100,000 businesses in the UK that the regulations apply to, including:

  • Financial and credit businesses.
  • Independent legal professionals.
  • Accountants, tax advisers, auditors, and insolvency practitioners.
  • Trust and company service providers.
  • Estate agency businesses.
  • Letting agency businesses.
  • Casinos
  • High-value dealers.
  • Art market participants.
  •  

Regulated businesses and individuals in the UK must register with the relevant supervisory authority, such as the Financial Conduct Authority (FCA) or the Institute of Chartered Accountants, to ensure they follow the appropriate AML regulations for their business sector.

Other businesses that fall within the regulated sectors but don’t have a set supervisory authority must register with HMRC.

The onus is on a business to find out its respective AML obligations to ensure it has the correct policies and procedures in place so that it complies.

How can my company stay up to date with the latest AML developments?

There are several steps that a company can take to ensure they keep up to date with Anti-Money Laundering (AML) developments and remain compliant with the latest requirements. These include:

  • Stay on top of regulatory changes.
  • Prepare an AML policy and manual and keep it updated.
  • Ensure staff are fully aware of their responsibilities and receive ongoing training.
  • Appoint a nominated officer to oversee AML compliance in a firm and cascade information.
  • Streamline the process and ensure all employees know the procedures to follow.
What is a risk assessment in the context of AML and compliance?

For a business to implement an effective Anti-Money Laundering (AML) compliance programme, it must first understand what money-laundering risks it faces. The UK Government adopts a risk-based approach to money laundering, and regulated businesses must undertake a risk assessment before introducing the appropriate AML response.

 

A risk assessment involves a regulated business considering:

  • Who its clients are.
  • The types of products and services it offers.
  • The jurisdictions in which it operates.
  • Its delivery channels.
  • The nature and volume of its transactions.
  •  

The AML programme it introduces then needs to be proportionate to this risk.

What is Customer Due Diligence (CDD) and why is it essential for AML and compliance?

Customer due diligence (CDD) is the process of verifying that a potential customer or client is who they say they are. Basic checks involve checking their name, address, date of birth and photo ID to ensure they’re not on prohibited lists.

 

CDD checks are usually undertaken when starting a business relationship.

What are the components of a successful AML training programme?

A successful Anti-Money Laundering (AML) training programme should include the following aspects:

  • Make employees aware of the law relating to money laundering.
  • Cover the AML responsibilities of staff.
  • Identify a chief point of contact for compliance matters within the organisation.
  • Identify what might be considered suspicious activity.
  • Clearly explain the procedure for reporting any potential transactions that might be linked to money laundering.
  • Be ongoing.
  • Be comprehensive.
Are all companies expected to maintain an AML programme?

All businesses that fall under the Money Laundering Regulations must introduce and maintain an Anti-Money Laundering (AML) programme.

The regulations apply to businesses and individuals in the UK that operate in the financial sector, such as accountants, solicitors, and estate agents. Every business covered by the regulations must be monitored by a supervisory authority, such as the Financial Conduct Authority (FCA) or the Institute of Chartered Accountants.

 

Other businesses that fall within the regulated sectors but don’t have a set supervisory authority must register with HMRC.

Can Money Laundering be stopped?

Money laundering is a serious crime that severely undermines the financial system. By working together and implementing effective Anti-Money Laundering (AML) policies, businesses can help trace and stop illegal financial flows, clamping down on criminal activity.

What are the key roles and responsibilities of a Compliance Officer?

Compliance officers are responsible for ensuring the organisation they work for adheres to the relevant Anti-Money Laundering (AML) regulatory requirements.

 

A compliance officer’s main responsibilities include:

  • Being aware of compliance requirements.
  • Undertaking an AML risk assessment.
  • Developing and implementing an effective AML programme.
  • Undertaking ongoing AML training with staff.
  • Auditing company processes and practices to identify any weaknesses.
  • Cooperating with regulators with reporting requirements and submitting Suspicious Activity Reports.
Does AML and compliance apply to small businesses?

Yes. Anti-Money Laundering (AML) regulations apply to all businesses that fall under the Money Laundering Regulations, regardless of their size.

How can my company monitor transactions for suspicious activities?

Different businesses monitor transactions in various ways to identify any suspicious transactions depending on the sector they are working in and the level of their exposure to risk.

 

An effective system will spot the warning signs and alert companies to potential suspicious transactions activity at an early stage.

 

Suspicious activities are considered those that are in some way irregular or inconsistent with a customer’s usual behaviour.

 

Various types of Anti-Money Laundering (AML) software exist for businesses to help identify any suspicious customers and transactions.

If a business suspects or becomes aware of any activity that might be linked to money laundering, they must complete a Suspicious Activity Report (SAR).

 

SARs alert law enforcement to potential instances of money laundering or terrorist financing and are a vital source of intelligence. Companies submit SARs to the National Crime Agency (NCA) through an online portal.

What is Enhanced Due Diligence?

Enhance Due Diligence (EDD) is when a company conducts further checks on a client or customer that has been identified as high-risk.

What is the role of businesses in preventing Money Laundering and Terrorist Financing?

Businesses that fall under the Money Laundering Regulations have an obligation to ensure they have the correct processes and procedures in place to identify and subsequently report any potential instances of money laundering.

 

Anti-Money Laundering (AML) requirements for businesses include undertaking customer due diligence, effective record keeping and reporting suspicious activity.

 

Money laundering underpins and enables many forms of terrorist financing and enables organised crime groups to conceal their assets and operations.

What are the consequences of non-compliance with AML regulations?

Penalties for non-compliance are high. Businesses that do not comply with Anti-Money Laundering (AML) regulations face significant reputational damage, hefty fines, or imprisonment for individuals within the business.

 

Regulators also have the authority to wind up or restrict the operations of firms found guilty of wrongdoing.

What are some common AML violations?

Some of the most common Anti-Money Laundering (AML) breaches include:

  • Inadequate risk assessments.
  • Poorly documented policies and procedures.
  • Failure to carry out adequate customer due diligence.
  • Information sharing requirement violations.
  • Lack of regular review of money-laundering regulations.
  • Inadequate staff training.
  • Poor resources allocated to AML compliance.
How costly is it to become AML compliant?

The total cost of becoming Anti-Money Laundering (AML) compliant will vary from business to business and will depend on various factors, including:

  • The size of an organisation.
  • The nature of its business.
  • Its level of risk.
  • How stringent is the AML policy it puts in place.
  • How many compliance officers it requires.
  • Any registration fees or fees required by a supervisory authority.
  • The price of any AML software that a business may use.
  •  

According to a report by LexisNexis, the annual cost of AML compliance for financial institutions in the UK stands at £34.2 billion in 2023.

 

However, the cost of implementing an effective AML programme and ensuring you are compliant will be far less than the price you pay for failure to comply.

What are examples of Anti-Money Laundering?

Anti-Money Laundering (AML) policies and practices vary, but good anti-money laundering practice includes the following:

  • Customer due diligence.
  • Effective AML training.
  • Suspicious activity monitoring and reporting.
  • Sanctions compliance.
What is KYC in an Anti-Money Laundering context?

Know Your Customer (KYC) is a mandatory process regulated businesses must perform as part of their Anti-Money Laundering (AML) due diligence requirements. Businesses are required to undertake a series of checks to ensure their customers are who they say they are and they do not pose a risk to the business.

 

KYC checks include verification of a customer’s:

  • Proof of identity.
  • Proof of address.

 

This information must also be verified periodically over time.

What is an Anti-Money Laundering certificate?

Various educational providers offer the opportunity to enhance your knowledge of Anti-Money Laundering (AML) by undertaking a course or series of courses to learn more about what goes into detecting, preventing, and reporting money laundering and financial crime.

 

These extra qualifications result in certification to evidence your knowledge. They can help you progress in a career as a compliance officer or other nominated person that is responsible for a business’s AML programme.

What is the difference between AML, CDD and KYC?

Anti-Money Laundering (AML) refers to the collection of laws, processes, procedures and regulations that prevent and help identify money from illegal sources from entering the financial system.

 

Customer Due Diligence (CDD) is the series of checks businesses must undertake to confirm a customer’s identity. These include verifying a customer’s name, address, date of birth and photo ID. CDD generally takes place when establishing a relationship.

 

Know Your Customer (KYC) is a continuous process that happens during a customer or client relationship and involves a series of ongoing checks to continue to verify that customer’s identity.

What should required entities do to comply with AML regulations?

The UK’s Anti-Money Laundering legislation is dictated by the Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000 and the Money Laundering, Terrorist Financing and Transfer of Funds 2017.

 

These laws set out which businesses fall under the Money Laundering Regulations. There are over 100,000 businesses that come within the scope of the money laundering regulations in the UK.

 

Businesses that fall under Anti-Money Laundering (AML) regulations must register with the relevant supervisory authority for their industry sector.

 

The Financial Conduct Authority (FCA) is the UK’s main financial services regulator with authority over banks, building societies, credit unions and other firms engaging in financial activities.

 

You can find a complete list of AML-regulated businesses and their supervisory authorities on the UK Government website by clicking here.

 

Supervisory authorities require regulated businesses to meet certain day-to-day responsibilities and implement particular internal controls and monitoring systems for AML. These include carrying out customer due diligence measures to check that customers are who they say they are and undertaking various risk assessments.

 

The precise nature of what you need to do depends on the size and complexity of your business, including the number of customers you have and the number and type of products and services you provide.

Why is it important to combat Money Laundering?

Money laundering allows criminals such as drug gangs and human traffickers to expand and benefit from their operations. Examples of money-laundering offences include tax evasion, theft, fraud, bribery, corruption, smuggling, modern slavery, human trafficking, drug trafficking and illegal arms sales.

 

Governments across the world are keen to clamp down on money laundering to stop the funding of such criminal activities.

How does the Anti-Money Laundering Directive help to prevent Money Laundering?

The Anti-Money Laundering Directive (AMLD) is a set of regulatory requirements issued by the European Union (EU) that contains rules to combat money laundering and terrorist financing by EU member states.

 

EU AMLDs are issued to reflect the changing global landscape. Each AMLD contains new additions to cover emerging criminal trends and methodologies, integrate Financial Action Task Force (FATF) recommendations, and address deficiencies in previous directives.

 

Before the UK left the EU on 31 January 2020, it updated the country’s AML regime to incorporate international standards set by FATF and to transpose the EU’s 5th Money Laundering Directive into UK law, known as The Money Laundering and Terrorist Financing (Amendment) Regulations 2019.

What are the roles of financial institutions in Anti-Money Laundering efforts?

Financial institutions have a crucial role in the fight against money laundering. Banks are one of the largest institutions in the field of finance and can handle millions of high-value transactions every day.

 

For this reason, banks and other financial institutions are at considerable risk of being the victims of financial crimes and putting in place an effective Anti-Money Laundering (AML) policy is crucial.

What do Anti-Money Laundering services cover?

Regulated businesses must ensure that they have robust Anti-Money Laundering (AML) processes in place and comply with the relevant supervisory authority requirements.

 

Our services focus on businesses’ Anti-Money Laundering and regulator requirements by implementing effective policies, procedures, training, and consultancy.

 

At AML & Compliance, we provide essential AML training to compliance officers and staff of all levels on:

  • AML Regulations.
  • What is money laundering?
  • How the regulations affect your business.
  • How the regulations affect individuals.
  • The tactics used by criminals to launder money.
  • How to identify potential AML issues.
  • The action to take when AML is a concern.
  • The requirements of a business and the policies and procedures required to comply with the AML regulations.
  • An overview of the business policies, what they mean, the action that must be taken and how they protect the business and its staff.
  • Recording and Reporting of AML-related issues.
  • Reporting to the National Crime Agency (NCA): how and why.

 

What to do in the event of direct contact with someone who the business suspects to be money laundering.

What are the key components of an effective Anti-Money Laundering programme?

The key components of an effective Anti-Money Laundering (AML) programme include:

  • Effective AML training for staff members.
  • Ongoing monitoring of customers, clients, and processes.
  • Appointing a Money Laundering Reporting Officer to oversee a firm’s compliance programme
  • Complying with reporting obligations, including submitting suspicious activity reports when potential money laundering activity is detected.
How do financial institutions conduct due diligence to prevent Money Laundering?

Anti-Money Laundering (AML) due diligence processes need to answer two key questions:

  • Is the person who they say they are?
  • Does their risk profile highlight any concerns?

 

The due diligence that financial institutions carry out is dependent on the answers to these questions and includes the following steps:

  • Customer Due Diligence (CDD). This involves conducting background checks and undertaking a risk assessment of potential and existing customers. Minimum CDD checks include:
    • Full name.
    • Residential address.
    • Date of birth.
    • Photo ID.
  • Know Your Customer (KYC). This is a mandatory process for banks and other financial institutions to identify a customer or client’s identity when opening an account. This information must also be verified periodically over time.
  • Enhanced Due Diligence (EDD). If a customer falls within the high-risk category, you need to conduct further checks. This can include:
  • Obtaining additional verification.
  • Analysing previous transactions.
  • Visiting their business.
  • Create a strategy for monitoring the client.

 

In addition, new rules have been in place since 10 January 2020 to incorporate international standards set by the Financial Action Task Force (FATF) and to transpose the EU’s 5th Money Laundering Directive.

 

These impose a series of new due diligence requirements on banks, including:

  • Requiring firms to include new additional high-risk factors when assessing the need for EDD.
  • Changes to E-money thresholds for CDD.
  • Requiring firms to update their records relating to the beneficial ownership of corporate clients.

 

You can read the full list of changes to the Money Laundering Requirements on the Financial Conduct Authority’s (FCA) website by clicking here.

What role do financial crimes monitoring and reporting play in Anti-Money Laundering services?

Ongoing screening of customers and transactions is crucial to the fight against money laundering. Continuing to oversee customers’ activity to check for any suspicious activity is a vital step in any firm’s Anti-Money Laundering (AML) programme.

 

If a business suspects or becomes aware of any activity that might be linked to money laundering, they need to complete a Suspicious Activity Report (SAR).

 

SARs alert law enforcement to potential instances of money laundering or terrorist financing and are a vital source of intelligence. Companies submit SARs to the National Crime Agency (NCA) through an online portal.

What are the major objectives of AML?

The fundamental purpose of Anti-Money Laundering (AML) is to protect the integrity and stability of a financial system by eliminating illegal activity.

 

Anti-Money Laundering (AML) is the series of systems, controls, processes and procedures that governments and businesses put in place to identify and prevent money laundering.

 

Money laundering is a financial crime. It involves taking proceeds that have been obtained from a criminal source (also known as ‘dirty money’) and disguising its origins so that it appears to have been acquired legitimately.

 

Money laundering allows criminals such as drug gangs and human traffickers to expand and benefit from their operations. Examples of money-laundering offences include tax evasion, theft, fraud, bribery, corruption, smuggling, modern slavery, human trafficking, drug trafficking and illegal arms sales. 

 

The objective of AML policies is to highlight any suspicious activity that might be linked to money laundering and to stop the funding of such criminal activities.

What are the different elements of AML?

There are four key elements that firms must address with their Anti-Money Laundering (AML) compliance programmes. These are:

  1. Customer Due Diligence (CDD). This involves conducting background checks and undertaking a risk assessment of potential and existing customers. Minimum CDD checks include:
  • Full name.
  • Residential address.
  • Date of birth.
  • Photo ID.

 

2. Know Your Customer (KYC). This is a mandatory process for banks and other financial institutions to identify a customer or client’s identity when opening an account. This information must also be verified periodically over time.

 

3. Customer and transaction screening. This involves overseeing customers’ behaviour to check for any suspicious activity.

 

4. Suspicious activity reporting. Banks and other financial institutions must make a Suspicious Activity Report (SAR) to alert the relevant authorities to any potential instances of money laundering or terrorist financing. Reports can be submitted online through the National Crime Agency’s (NCA) online portal.