Banks and other financial institutions are required to implement an anti-money laundering and anti-terrorist financing compliance programme in most worldwide jurisdictions in order to identify and prevent money laundering and terrorism financing activities and meet their regulatory requirements.
Many banks, however, find that attaining AML/CFT compliance is a difficult process: they must guarantee that they gather the essential information from clients, check transactions on a regular basis, and, if necessary, report suspicious behaviour to the proper authorities.
Adding to the difficulty, banks must be informed of new criminal techniques and potential legislative changes that may influence their internal anti-money laundering procedures and modify their compliance duties.
Due to the administrative overhead, banks should create a compliance checklist that supports and informs their AML programme in order to manage their AML/CFT duties and ensure the efficacy and efficiency of AML procedures. Banks may use an AML checklist to not only create their AML infrastructure but also manage their day-to-day reaction to money laundering concerns.
As a result, the following critical aspects of an effective AML compliance checklist should be included:
Training on anti-money laundering regulations
Bank staff should get AML training, according to FATF standards, in order to stay competent of spotting suspicious conduct that might suggest money laundering or terrorism funding. As a result, a continuous AML training plan should be included in a bank’s compliance checklist in order to respond to new legislation and growing criminal tactics.
In accordance with FATF guidelines, a bank’s AML checklist should contain a need to select a compliance officer to oversee the AML compliance programme and act as a liaison with the financial authorities. The compliance officer should be a senior employee with the authority and knowledge to successfully carry out their duties.
AML Measures Based on Risk
Banks must use a risk-based strategy to AML/CFT in order to comply with FATF (Financial Action Task Force) standards.
This means that banks must adopt AML responses that are comparable to the criminal risks they face, with higher-risk clients receiving more intensive customer due diligence, sanctions screening, and transaction monitoring procedures and lower-risk customers receiving simpler measures.
In most countries, the risk-based approach is at the heart of AML law, and AML checklists should be flexible enough to handle the scale reactions that it requires.
Verification of Identity
Identity verification is an important part of risk-based AML/CFT: in order to deploy proper AML actions, institutions need to know who they’re working with and what risk they pose.
Customer due diligence (CDD) steps should be prioritised in an AML checklist, including enhanced due diligence (EDD) measures for higher-risk consumers. In practice, CDD should be able to reliably determine:
- The nature of the customer’s involvement in the business.
- Personal information on a customer, such as their name, address, and date of birth.
- Beneficial ownership of a business in which the owner is not the client or consumer.
Status of PEP
Banks must determine whether a customer is a politically exposed person (PEP) who is more likely to be involved in money laundering. Clients who are discovered to be PEPs or who become PEPs should be subjected to stricter due diligence. To guarantee that any changes in status are recognised, a bank’s AML checklist should include PEP screening during onboarding and throughout the business relationship.
Banks must avoid doing business with people, businesses, or nations that are included on international sanctions lists. With this in mind, a bank’s anti-money laundering (AML) checklist should include a sanctions screening procedure that considers all relevant lists, including those published by national and international agencies. Customers must be screened against the US Office of Foreign Assets Control (OFAC) sanctions list as well as the UN Security Council sanctions list in the United States, for example.
AML checklists should concentrate on assisting banks in maintaining continuous compliance, which includes monitoring customer transactions for suspicious behaviour in respect to their risk profile. Transaction monitoring should be put up to detect:
- Transactions that exceed regulatory limits
- Unusual transactions, such as those involving unusually large sums or a high volume of transactions
- Transaction patterns that are unusual
- Transactions with PEPs or sanctioned people
- Transactions with nations that pose a high risk
- Customer-related negative media stories
Reports of Suspicious Activity
Should potential money laundering be found, bank AML checklists should contain the mechanism for filing a suspicious activity report (SAR) with the financial authorities. The procedure for submitting a SAR should be transparent and involve participation from top management.
Every stage of the AML procedure necessitates the preservation of records. Banks must assess risk based on customer records, and any subsequent investigations by authorities will necessitate the disclosure of information contained in those same client records. With this in mind, bank anti-money laundering (AML) checklists should address the necessity for good documentation and record-keeping from onboarding to monitoring, screening, and SAR reporting.
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