essay on anti money laundering

Anti Money Laundering and Financial Crime Essay

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AML and banking institutions

Anti-money laundering requirements, the anti-money laundering process in our firm, reasons for complying with aml requirements, potential consequences of not complying with the aml requirements, final thoughts on the aml activities, financial crimes, concluding remarks.

Bibliography

Banking institutions across the globe are currently faced by various challenges emanating from money laundering and other related crimes. There are regulations that are provided by the regulatory bodies that have to be adopted by the banking institutions. The reputation that the bank will receive in a given society will be negatively affected by the number of irregularities that have been registered in the bank in relation to money laundering.

As a result, most banking institutions have set aside a good fraction of their time and money in developing control mechanisms for the practice. The consequences of defying the regulations are adverse on the performance of the organization.

There are a number of requirements by the government on the AML procedures to be developed and adopted by the firms in the financial service in industry in an attempt to fight the illegal practice. Firstly, it is required that the organizations develop internal policies and procedures to be adopted by the employees of the organizations. The firms should develop and adopt Anti-Money Laundering programs within their organizations that are in accordance with the overall objective of the organization.

Secondly, having put in place the control measures, there is need for the firms to establish the office of the Compliance Officer. This is charged with the responsibility of ensuring that the operations of the organization are in line with the provisions by the government and government control agencies on financial issues.

There is also a need to have training programs aimed at equipping the employees with procedures that are appropriate in curbing the vice. The employees are supposed to be trained on ways of detecting suspicious transactions that may be linked to some unclean money in circulation within a financial institution. Finally, there is need to establish an audit team by the financial organization that regularly examines the effectiveness of the AML procedures and programs practiced in the organization and make necessary adjustments.

In establishing a proper strategy to deal with the money laundering practice, there is need to understand the steps that are most commonly involved in the process. The criminals involved in the money laundering practice will not be at ease until the roots of the illegally obtained funds are cleansed. Thus, the preventive mechanisms can be applied if there are ways of determining probable irregularity right from the beginning.

The first step involves the acquisition of a given property or cash and pumping it into the financial system of a given organization. This step is known as placement. The step is not applicable in cases where the cash is already in circulation within the system as is the case in banking institutions. The second phase will not involve performing various manipulations on the transactions details in order to make them appear to be genuine. This is actually the most sensitive part in money laundering as it involves measures to convince the outsiders that the cash or property was legally obtained.

Having deceitfully established the legality, the next step is to integrate the acquired property into use and probably think of other ways of developing another scheme. To avoid complications, the effective money laundering procedures should be sensitive to irregularities at the very early stages.

The financial institutions like ours have been a good base for money laundering practices by many intelligent criminals for a long period. It has been observed that they ‘are the ideal markets to move large bulks of cash without attracting much suspicion.’ However, this difficulty has been overcome by various government legislations like the 1970 Bank Sector Act in he United States. In developing the anti-money laundering strategies, there is a need to make certain considerations. Initially, there is need to identify the services that help in the money laundering in the financial institutions.

After this, the first step is to impose currency transaction reporting requirements on the banking institutions. The banking institutions are required to provide a report on large cash transactions. There is also a requirement that any individual exporting or importing large valued products should issue a declaration on the anticipated flow of funds. It is also important that a financial institution understands well the costumers that it deals with. Proper screening of the customers of financial institutions will help in mitigating vices like terrorist activities on the institution by ill-minded customers.

Developing good relationship with the customers and other stakeholders of the firm has been one of our key steps in managing money laundering. It is important to understand the needs and ability of the customers, the employees, the partners and the stockholders of our organization. Developing such relationship has enabled us to monitor the various financial transactions that can lead to money laundering. Our management teams are able to access the premises of all the customers that are carrying out large transactions and verify the validity and credibility of the transaction. Our closeness to customers and the knowledge of the value of the premises of our customers has enabled us to realize, in good time, planned crimes by some of the customers.

We have also adopted training programs for our staff to equip them with the techniques of detecting the criminals. Our staffs have vast knowledge on practices in the banking sector that can raise suspicion of a possibility of a financial crime. With the adequate knowledge of the status of the customers, the staffs are able to raise alarms whenever an abnormal transaction is performed. A successive withdrawal of large sums of money that is not proportional to the nature of the business of our customers is a way through which we have managed to detect illegal transactions by some of our customers.

We have also witnessed other cases where one of our customers had more than five accounts with our bank with no proper reasons for having so many accounts. It was also observed that there were frequent cash flows from one account to the other within an unjustifiable period. On little scrutiny, it later emerged that the customers was a long time drug dealer and was dealing with numerous illegally instituted business firms across the borders. Transfer of large cash from the accounts was a way of cleansing the illegally obtained funds.

Another case that had been identified by our staff involved a casual laborer who deposited a sum of £200,000 twice within a given week. This is a customer whose details show that the average monthly wages total to about £1,049 and there are no other significant income generating projects that he owns. It later turned out that the customers had entered into deals with the others not clients to our firm and were trading on ivory to the neighboring countries. In general, our close knowledge of the customers and the training that we had provided to our staffs have taken as a stride in controlling the money laundering practices by criminals using our bank as a financial agent.

Following the government provisions has also been our concern and a key AML procedure. The government has also established Anti-Money Laundering Compliance program that is to be adopted by each of the financial institutions in the country. It is in this view that we established the office of the Compliance Officer who has taken a good lead in ensuring that our control measures are in line with the legal provisions in our country. We have always ensured that we review AML programs regularly to check its effectiveness owing to the developments that are witnessed among the criminals involved here. A control program that was applicable a while ago may not necessarily fit today.

We are also sensitive to the provisions by the local financial regulatory bodies as well as the international bodies like the United Nations on the procedures of preventing Money Laundering. The United Nations has been in the forefront in the fight against the practice. The UN has developed various international conventions that deal with money laundering activities like drug dealing and terrorist activities. These conventional agreements apply to all the member countries of the UN and are thus our fundamental guiding principles. Similar provisions have also been provided by the European Union (EU) to its member states.

The UK, being on of the founding members of the EU has struggled to help in implementing and enforcing the regulatory policies by the Union. In the Financial Service industry in the UK, there is the Financial Services Authority, a body concerned with regulating the financial activities in the country. One of its mandates is to prevent financial crimes in the country.

Within the sector is also the Joint Money Laundering Steering Group (JSMLG) that is composed of various trade associations in the country. The group has developed guideline principles on how to manage money laundering within and outside the financial institutions. The Financial Services Authority recognizes that the firms that follow the guidelines provided by the JMLSG are the ones that are loyal to the government’s regulations and its fight against money laundering. Our financial institution has put in place programs such as employee training on ways of detecting and reporting abnormal transactions that can be linked to a criminal offence. Our loyalty to the FSA and its effort to end the vice is one of the reasons that underlie our establishment of such programs.

We have every reason to comply with the AML requirements as required by the government regulatory agencies. Firstly, the government relies so much on our services to help in fighting the criminal activities associated with money laundering. It has been noted that with the nature of our services, we provide a good avenue for attempting to disguise the source of illegally obtained funds by criminals. In this way, we closely interact with the defaulters and an analysis of their financial proceeds through their accounts can provide good insight on the possibility of some irregular economic practices. In so developing programs that help in tracking down the practice, we help the government in its fight to reduce crimes in the country.

Secondly, now that this is a legal provision, our compliance to the requirements will ensure that we are not at loggerheads with the governing authority. The negative impacts leading to a fall out with the governments are likely to be prevented if we adopt the required procedures. Besides, as a business organization, we also have the responsibility of shaping the society that we operate in. By adopting the AML requirements, we will be promoting socio-economic and political developments in the society through eliminating crimes.

The adoption of AML requirements is also essential in reinforcing the organizational structure and in strengthening the ability of the organization towards achieving its objectives. Effective adoption of the AML requirements requires their incorporation into the entire supply chain of an organization. The know-your-customer (KOY) strategy required in the AML process is very crucial in developing effective supply chain in our organization. In this way, the adoption of the AML principles and procedures will enable the management of our organization to effectively coordinate all the departments in our institutions to work towards a common agenda. The regular training of employees on the emerging issues related to money laundering is in line with our objectives as an organization. We have always developed an organizational culture that aims at employee motivation. The employees are regularly updated not only on these new managerial techniques but also on the emerging technology applications in our institution and industry.

Besides, the money laundering practice has other direct and indirect negative impacts in our operations as a business organization. There are associated losses that are incurred by financial institutions following transactions that entail such illegally sourced funds. The costs that may be incurred at a later stage in reexamining a transaction that is suspected to be abnormal are high and could be cut down if the above requirement were adopted at the right time. It is better to deal with such irregularities from the onset rather attempting to make corrections later.

The consequences of non-compliance with the Anti-Money Laundering requirements are obvious and are adverse on the operations of financial institutions. It will definitely impede the process of eliminating the practice and this will encourage the vice. Consider terrorist financing as one of the money laundering practices. The terrorists can venture into the financial market and manipulate operations to suit their needs. They can engage in illicit businesses that may appear to be legitimate and solicit funds that can be used to purchase military equipment and promote terrorist attack on some targeted individuals, groups, or organization.

Large organizations like ours often suffer great losses following such terrorist activities. It is therefore essential that we participate in the activities that are aimed at minimizing or completely eliminating the practice amongst us. Besides, if it emerges that a criminal successfully carried out unclean transaction through our firm as the financial agent, it might appear to the public that we were also involved in the scandal. The kind of image that this can create among the public is not friendly to our aim to excel in the banking industry.

The other important consequence of not complying with the AML requirements is the legislative measures that are likely to be taken against our firm. The requirements by the finance regulatory authorities are government provisions and non-compliance is punishable before the court of law. The firm is likely to suffer huge losses from lawsuits following irregularities that may result from such negligence.

Thus, it is important to acknowledge the fact that despite the difficulties that are involved in fight against money laundering, we, the financial services firms are better placed than the law-enforcers in detecting and raising alarms on transactions that may indicate an underlying criminal activity. By knowing our customers well, we re able to track down abnormal transactions that are not in line with the customer’s daily operations or the average income.

The participation in the anti-money laundering activities is of great significance to our organization. There are often associated losses when the criminals are allowed to successfully carry the day in their bid to hide their dirty transactions. The effects are always felt by the financial institutions and this becomes a key reason as to why we have to actively be involved in the control measures. The kind of reputation that we may receive among the public if some illegal transaction is carried out by a criminal client to our organization is a poor one that is likely to reduce our operations in the region.

Financial crimes are those that involve change of ownership of property through illegal means. The financial crimes can take different forms and one that is common especially in the banking institutions is money laundering. Other crimes include theft, frauds including bank or mortgage frauds, forgery, manufacture of counterfeit products as well as tax evasion. These criminal activities can be conducted by individuals or groups of people. They could also be organized by large organizations.

As financial institutions, we are likely to be the agents through which much of the financial crimes can be committed. We are also likely to be victims of such criminal activities. Money laundering and frauds are the financial crimes mostly encountered in banking industry. We are thus concerned with developing and adopting various mechanisms for preventing the crimes.

Money Laundering

This is the most common financial crime that we encounter in the banking institution. Money laundering is the process of covering the origins of cash or some property and claiming that the proceeds that follow from such illegally obtained funds/property are actually legitimate. It involves the remodeling of the source of some large illegally obtained sums of money to appear to have a legitimate source.

The issue of money laundering has not attracted the public interest as compared to other crimes such as robbery with violence, drug dealing, or mere shoplifting. It remains a silent and unnoticed threat to the public in that, unlike the other crimes that involve dramatic events that attract attention of the public and affect them psychologically, most money laundering processes occur silently after the above crimes have been carried out. It is important to note that money laundering, in most cases, follow crimes like drug trafficking, theft, violent robbery, or a terrorist activity.

Money laundering has been of serious concern to the management of financial institutions, the governments, and the international agencies. It is very common among ‘mainstream banks, as opposed to finance houses, currency exchange services and other non-bank venues.’ The amount of money laundered each year is enormous prompting the governments and international agencies to enact policies that regulate the vice.

Again, if the vice is practiced successfully in a given situation, the money launderers get full control over the proceeds of the illegally obtained wealth. This leads to increase in the practice alongside other related vices like corruption. The government regulations on the wealth acquisition procedures will then have poor grounds making the fight against the vice difficult. The problem that the governments and international regulatory bodies find in developing the procedures to prevent the vice is the little knowledge that the public have concerning money laundering. The money laundering processes and the forms that it takes are not well known to the public.

Money laundering can take different forms depending on the type of the institutions and the level of the individuals involved. Structuring transactions is the most common money laundering practice. The practice, also referred to as “smurfing”, involves breaking down large cash transactions into smaller sub units to avoid raising eyebrows about a probable irregularity. It aims to avoid the reporting requirements established in the anti-money laundering policies.

Another common approach involves where an organization has ghost workers that are paid. The concerned personnel fix transactions based on wages paid to imaginary workers. Money laundering can also be inform of raising or lowering significantly the value of the invoices of a transaction in order to hide the flow of cash in an institution that can expose the irregularities involved. It could also involve the purchasing and reselling of real estate to let the public have a perception that the real estate was obtained legally. We have developed sufficient strategies that enable us to fight this vice in our institution

This is another financial crime that is common in the banking industry. Fraud can take different forms including presentation of false documents, forging signatures, manufacturing fake currencies, false billing and even tax evasion. Just as money laundering, these fraudulent practices are aimed at obtaining some property in an illegal way and the banking institutions are more liable as they can facilitate transfer of large amounts of money by a mere mouse click or stroke of a pen.

We have adopted modern technology in fighting frauds like fake signatures, documents or currencies. We have set up anti-fraud training programs that are intended to equip our staff with the appropriate measures for controlling the vice.

The financial crimes continue to be a threat to our operations as business institution. There are crimes that are not directly related to our operations but that can have serious impacts on these operations. As a partisan in the society, we need to help the government in the fight to end these crimes in whichever way we can.

Gallant, M, Money laundering and the proceeds of crime: economic crime and civil remedies, Edward Elgar Publishing, Cheltenham, 2005.

Mills, A, Essential Strategies for Financial Services Compliance, John Wiley and Sons, New Jersey, 2011.

Pricewater House Coopers, Anti-Money Laundering a global financial services issue , N.d. Web.

Purkey, H, “The Art Of Money Laundering,” Florida Journal of International Law , 22(1), Apr2010, 111-144. Web.

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What Is Anti-Money Laundering (AML)?

Anti-money laundering is an international web of laws, regulations, and procedures aimed at uncovering money that has been disguised as legitimate income. For centuries, governments and law enforcement agencies have tried to fight crime by following the money. In modern times, that comes down to anti-money laundering (AML) laws and activities.

Money laundering is the concealment of the origins of money gained from crimes, including tax evasion, human trafficking, drug trafficking, and public corruption . It also includes money being illegally routed to terrorist organizations.

Anti-money laundering regulations have had an impact on governments, financial institutions, and even individuals around the world.

Key Takeaways

• Anti-money laundering (AML) laws, regulations, and procedures are attempts to reduce the ease of hiding criminal profits.
• Financial institutions combat money laundering with Know Your Customer (KYC) and customer due diligence (CDD) measures.
• Banks are tasked with monitoring financial transactions and reporting suspicious activity, which is where criminal financial activity tracking begins.

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Know Your Customer (KYC)

Regulatory compliance at financial institutions starts with a process often called Know Your Customer (KYC). KYC determines the identity of new customers and whether their funds originated from a legitimate source.

Money laundering can be divided into three steps:

• Depositing illicit funds into a financial system
• "Layering," or making a series of transactions, usually repetitive and voluminous, to obfuscate the illicit origin of the funds
• "Cleaning" and "washing" the funds by using them to buy real estate, stocks, commercial investments, and other legitimate assets

The KYC process aims to stop money laundering at the first step—when a customer attempts to deposit money.

A study from Verafin, a financial crime risk management company, estimates that $3.1 trillion in illicit money flowed through the global financial system in 2023.

Financial institutions screen new customers against lists of parties that pose a higher-than-average risk of money laundering: criminal suspects and convicts, individuals and companies under economic sanctions , and politically exposed people, encompassing foreign public officials, their family members, and close associates.

Customer Due Diligence (CDD)

Throughout the account’s lifetime, financial institutions must conduct customer due diligence (CDD)—the practice of maintaining accurate and up-to-date records of transactions and customer information for regulatory compliance and potential investigations.

Certain customers may be added over time to sanctions and other AML watchlists, warranting checks for regulatory risks and compliance issues on an ongoing basis.

According to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), the four core requirements of CDD in the United States are:

• Identifying and verifying the customer’s personally identifiable information (PII)
• Identifying and verifying the identity of beneficial owners with a stake of 25% or more in a company opening an account
• Understanding the nature and purpose and compiling risk profiles of customer relationships
• Monitoring suspicious transactions and updating customer information

CDD may try to uncover and counter money laundering patterns such as layering and structuring, also known as “ smurfing ”—breaking up large transactions into smaller ones to dodge reporting limits.

For example, financial institutions have instituted AML holding periods that force deposits to remain in an account for a minimum of days before they can be transferred elsewhere.

If patterns and anomalies indicate money laundering activities, suspicious transactions in U.S. jurisdictions must be reported in Suspicious Activity Reports (SARs) to relevant financial agencies for further investigation.

Anti-Money Laundering in the U.S.

AML regulations in the U.S. expanded after the Bank Secrecy Act (BSA) was passed in 1970. For the first time, financial institutions were required to report cash deposits of more than $10,000, collect identifiable information of financial account owners, and maintain records of transactions.

Additional legislation was passed in the 1980s amid increased efforts to fight drug trafficking, in the 1990s to enhance financial surveillance, and in the 2000s to cut off funding for terrorist organizations.

Banks, brokers, and dealers now follow a complex regulatory framework of conducting due diligence on customers and tracking and reporting suspicious transactions. A written AML compliance policy must be implemented and approved in writing by a member of senior management and overseen by an AML compliance officer.

Recent Expansions

The Anti-Money Laundering Act of 2020 —the most sweeping overhaul of U.S. AML regulations since the Patriot Act passed after the 9/11 terrorist attacks in 2001—subjected cryptocurrency exchanges, arts and antiquities dealers, and private companies to the same CDD requirements as financial institutions.

The Corporate Transparency Act , a clause of the Anti-Money Laundering Act, eliminated loopholes for shell companies to evade anti-money laundering measures and economic sanctions.

FinCEN, a U.S. Department of the Treasury bureau, issues guidance and regulations that interpret and implement the BSA and other AML laws. FinCEN’s guidance and regulations provide detailed instructions for financial institutions on how to comply with AML requirements.

In addition to these federal laws, many states have their own AML statutes and regulations. These state laws often mirror the federal requirements but may include additional provisions.

International Anti-Money Laundering

The European Union (EU) and other jurisdictions adopted similar anti-money laundering measures to the U.S. anti-money laundering legislation. Enforcement assumed greater global prominence in 1989 when a group of countries and nongovernmental organizations (NGOs) formed the Financial Action Task Force (FATF).

The FATF is an intergovernmental body that devises and promotes the adoption of international standards to prevent money laundering. In October 2001, following the 9/11 terrorist attacks, FATF’s mandate grew to combat terrorist financing.

Those standards—the FATF’s 40 Recommendations—provide a framework for AML and Combating the Financing of Terrorism (CFT) regulations and policies in more than 190 jurisdictions worldwide, covering CDD, transaction monitoring, reporting of suspicious activity, and international cooperation.

Other important international organizations in the fight against money laundering include the International Monetary Fund (IMF) and the United Nations (U.N.), and programs include the Council of the European Union’s Anti-Money Laundering Directive (AMLD) and the Basel Committee on Banking Supervision’s Customer Due Diligence (CDD) for Banks.

The IMF has pressed member countries to comply with international norms thwarting terrorist financing. The U.N. added AML provisions to address money laundering associated with drug trafficking in the 1998 Vienna Convention, with international organized crime in the 2001 Palermo Convention, and with political corruption in the 2005 Meridian Convention.

The Council of the European Union’s AMLD, a directive that sets out AML/CFT requirements for all EU member states, has been amended several times to reflect the changing risks of money laundering and terrorist financing. The Basel Committee on Banking Supervision’s CDD for Banks provides detailed recommendations for banks on how to identify and verify the identity of their customers.

Anti-Money Laundering and Cryptocurrency

Cryptocurrency has drawn increasing attention among AML professionals and regulatory bodies. Virtual coins provide anonymity to users, presenting criminals with a convenient way to store and move money.

According to cryptocurrency and blockchain analytics firm Chainalysis, addresses connected to illicit activity sent nearly $39.6 billion worth of cryptocurrency in 2022, up 141% from 2021. This figure dropped to $24.2 billion in 2023, but it was still a significant amount of money (it was only about 0.78% of all illicit funds).

The decentralized nature of cryptocurrency markets makes it challenging to implement and enforce AML regulations. Traditional AML frameworks designed for centralized financial institutions were not adequate in the past for the decentralized cryptocurrency ecosystem, but regulators have made significant progress in addressing the weaknesses that were present.

Blockchain analysis and monitoring tools enable financial institutions and law enforcement to identify and investigate suspicious cryptocurrency transactions. Crypto forensic services like Chainalysis, Elliptic, and TRM Labs have the technology to flag crypto wallets , exchanges, and transactions tied to designated terrorist organizations, sanctions lists, political groups, government actors, and organized crime such as hacking, ransomware, scams, and contraband trafficking on darknet markets.

Inside the U.S.

In the U.S., cryptocurrencies are largely an unregulated market, and few regulations explicitly target the asset class by name. Instead, AML enforcement actions, such as those against crypto exchanges Binance and FTX, have been prosecuted under existing laws and statutes, such as the Bank Secrecy Act and the Foreign Corrupt Practices Act (FCPA).

Only under the Anti-Money Laundering Act of 2020 did U.S. companies become legally required to comply with financial screening regulations that apply to fiat currencies and tangible assets. Businesses that exchange or transmit virtual currencies now qualify as regulated entities and must register with FinCEN, adhere to AML and CFT laws, and report suspicious customer information to financial regulators.

Outside the U.S.

More formal rules on intervening in virtual currency money laundering are expected to be introduced in the U.S. and abroad. Recent steps include an Internal Revenue Service (IRS) proposal and several European bills for financial platforms to report digital asset payments and transactions to national and transnational regulatory bodies, law enforcement agencies, and industry stakeholders.

On the global stage, the Financial Action Task Force (FATF) Travel Rule, an international AML framework that would require collecting and sharing beneficiary information for cross-border cryptocurrency flows, is being closely watched and gaining traction among regulatory bodies worldwide.

Several countries have implemented or are implementing the FATF Travel Rule in their civil and criminal codes to increase the transparency and accountability of cryptocurrency transactions.

Some AML requirements apply to individuals. By law, U.S. residents must report receipts of multiple related payments totaling more than $10,000 to the Internal Revenue Service (IRS) on IRS Form 8300 .

What Is Considered Anti-Money Laundering?

Anti-money laundering (AML) refers to legally recognized rules, national and international, that are designed to thwart hiding criminal profits inside the financial system.

Customer due diligence (CDD) refers to practices that financial institutions implement to detect and report AML violations.

Know Your Customer (KYC), also known as Know Your Client, is a component of CDD that involves screening and verifying prospective banking clients.

What Is an Example of Anti-Money Laundering?

Financial institutions are required by law to gather information on customers, track deposits and outflows, and report any suspicious activity.

What Are the 3 Stages of Money Laundering?

The three stages are placement (depositing), layering (obscuring through many transactions), and integration or extraction (using for large purchases or withdrawing).

Governments have evolved their approach to money laundering deterrence by establishing and revising regulatory controls that elicit proactive participation from financial institutions. Anti-money laundering is crucial for safeguarding the financial system from crimes.

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Internal Revenue Service. “ Form 8300: Report of Cash Payments Over $10,000 Received in a Trade or Business .”

Internal Revenue Service. “ Cash Payment Report Helps Government Combat Money Laundering .”

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Anti-Money Laundering

What it is and why it matters.

Money laundering is a type of financial crime. It involves taking criminally obtained proceeds (dirty money) and disguising their origins so they’ll appear to be from a legitimate source. Anti-money laundering (AML) refers to the activities financial institutions perform to achieve compliance with legal requirements to actively monitor for and report suspicious activities.

• Today's World
• Who Uses It
• How It Works

History of Anti-Money Laundering

The United States was one of the first nations to enact anti-money laundering legislation when it established the Bank Secrecy Act (BSA) in 1970. An early effort to detect and prevent money laundering, the BSA has since been amended and strengthened by additional anti-money laundering laws. The Financial Crimes Enforcement Network is now the designated administrator of the BSA – with a mission to "safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering and other illicit activity." In 1989, multiple countries and organizations formed the global Financial Action Task Force (FATF). Its mission is to devise and promote international standards to prevent money laundering. Shortly after the 9/11 attacks on the US, FATF expanded its mandate to include AML and combating terrorist financing. The International Monetary Fund (IMF) is another important organization. With 189 member countries, its primary purpose is to ensure stability of the international monetary system. The IMF is concerned about the consequences money laundering and related crimes can have on the integrity and stability of the financial sector and the broader economy.

Why is anti-money laundering important?

The estimated amount of money laundered globally in one year is 2% to 5% of global GDP, or US$800 billion to US$2 trillion – and that’s a low estimate. Money laundering often accompanies activities like smuggling, illegal arms sales, embezzlement, insider trading, bribery and computer fraud schemes. It’s also common with organized crime including human, arms or drug trafficking, and prostitution rings.

Anti-money laundering is closely related to counter-financing of terrorism (CFT), which financial institutions use to combat terrorist financing. AML regulations combine money laundering (source of funds) with terrorism financing (destination of funds).

Beyond the moral imperative to fight money laundering and terrorist financing, financial institutions also use AML tactics for:

• Compliance with regulations that require them to monitor customers and transactions and report suspicious activity.
• Protection of their brand reputation and shareholder value.
• Avoidance of consent orders as well as civil and criminal penalties that could be levied because of noncompliance or negligence. 
• Reduction of costs related to fines, employee and IT costs, and capital reserved for risk exposure.  

Analytics Powers Anti-Money Laundering Efforts

Before turning to SAS, Landsbankinn had a screening system that flagged about 1,000 false positive transactions each day. With a limited number of investigators, lowering that number to focus on truly suspicious claims was important. Just months after turning to SAS Anti-Money Laundering, the number was down to about 100 daily – a 90% reduction in false positives.

Anti-Money Laundering in Today’s World

Money laundering exacts substantial costs to individuals and institutions and can have devastating consequences for society. Learn how artificial intelligence techniques like machine learning are helping redefine AML and compliance for some of the world's top global banking organizations.

Next-generation anti-money laundering

Ready to advance AML to the next level? Using robotics, semantic analysis and AI can make processes more automated, efficient and effective. Read about six keys to success with AML powered by machine learning.

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A proactive approach to AML

Checking off boxes to follow prescriptive compliance processes can hinder investigations in today’s fast-changing landscape. Follow this proactive, risk-based framework to become nimbler and more effective across all stages of your AML investigations.

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5 game changers to fight money laundering

To move to the next level of anti-money laundering, you need a tightly focused strategy supported by sophisticated analytics. Learn how SAS can change your AML game plan in the evolving battle against money laundering.

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Who's using anti-money laundering?

Criminal charges. Big fines. Negative publicity about compliance lapses and penalties. They all damage reputation and deflate public perception. And these are just some of the reasons industries are concerned about money laundering.

At a Tier 2 regional US bank, SAS deployed an ensemble of AI models that enabled the bank to reduce alert volume by 55% and increase suspicious activity report (SAR) yield by 25%. Another Tier 1 global bank used machine learning to automate due diligence document reviews, reducing effort from two weeks of staff time to less than a minute.

• Capital Markets

Capital markets firms are looking for ways to reduce exposure to fraud and financial crimes. Anti-money laundering from SAS helps them detect, investigate and report on illicit activity from fraud and security systems – while reducing AML technology and investigation costs.

Money launderers often buy insurance then submit claims to retrieve funds. Sometimes they use products structured as investments, such as variable annuities and life insurance policies. By overfunding and moving money in and out of policies, they establish a stream of “innocent” wire transfers or checks – all for the low cost of early withdrawal penalties.

• Retail & Consumer Goods

Legitimate store-front businesses or websites can be used as payment processors to launder money. As a result, retailers can become unsuspecting cloaks for criminal activity. For example, money launderers can use an e-commerce storefront merchant account to process transactions originating elsewhere – a practice known as transaction laundering.

When criminals derive funding from robbery, extortion, embezzlement or fraud, a money laundering investigation is often the only way to locate and restore the stolen funds. Targeting the money laundering aspect of criminal activities and depriving criminals of profits is a sure way to end the crimes.

Learn More About Industries Using This Technology

• Health Care
• Hospitality
• Manufacturing
• Sports Analytics
• Small & Midsize Business
• Telecom, Media & Technology
• Travel & Transportation

AML/CFT controls, when effectively implemented, mitigate the adverse effects of criminal economic activity and promote integrity and stability in financial markets. International Monetary Fund

Fortify your fight against money laundering

Chief compliance officers at financial institutions face three major challenges in complying with anti-money laundering regulations: A growing volume of cross-border transactions, high false positives, and constantly changing AML regulations and business requirements. See how SAS Anti-Money Laundering can help you achieve compliance – by significantly reducing false positives, boosting operational efficiency and quickly uncovering unknown threats while showing a holistic view of risk.

How Anti-Money Laundering Works

To identify and report potential money laundering and address compliance requirements, financial institutions must have a deep understanding of how the crime works. Money laundering involves three stages: placement, layering and integration. These are a complex series of transactions that start with depositing funds, then gradually moving them into what appear to be legitimate assets.

• Placement refers to how and where illegally obtained funds are placed. Money is often placed via: Payments to cash-based businesses; payments for false invoices; “smurfing,” which means putting small amounts of money (below the AML threshold) into bank accounts or credit cards; moving money into trusts and offshore companies that hide beneficial owners’ identities; using foreign bank accounts; and aborting transactions shortly after funds are lodged with a lawyer or accountant.
• Layering refers to separating criminal funds from their source. It involves converting the illicit proceeds into another form and creating complex layers of financial transactions to disguise the funds' origin and ownership. Criminals do this to obfuscate the trail of their illicit funds so it will be hard for AML investigators to trace the transactions.
• Integration refers to re-entry of the laundered funds into the economy in what appears to be normal, legitimate business or personal transactions. This is sometimes done by investing in real estate or luxury assets. It gives launderers and criminals an opportunity to increase their wealth.

Regulations, Compliance & AML

The FATF helps countries create a financial intelligence unit (FIU) that’s responsible for managing the flow of information between their institutions and law enforcement agencies. Government legislation and regulation by each country’s FIU make financial institutions the first line of defense against money laundering and terrorist financing.

By reporting suspicious activities to the government via suspicious transaction reports (STRs) and suspicious activity reports (SARs), banks alert law enforcement to possible criminal activities. Many regulatory bodies have enacted critical AML legislation with compliance requirements banks follow to enforce anti-money laundering, such as:

• US : US Patriot Act, Bank Secrecy Act.
• Europe : EU Fourth Anti-Money Laundering Directive (4AMLD).
• Canada : Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
• Australia : Anti-Money Laundering and Counter-Terrorism Financing Act of 2006.

AML regulations vary by jurisdiction – but in general, financial institutions undertake the following measures to meet compliance requirements:

• Customer identification program/know your customer (KYC) . Financial institutions must require proper customer identification and verification to ensure legitimacy. Higher risk products and services (e.g., private banking) require more in-depth documentation.
• Large currency transaction reporting . Requirements call for institutions to file a regulatory report (known as a “CTR” in the US) for transactions above a certain threshold made by a single customer during a business day.
• Suspicious activities monitoring and reporting . Regulatory agencies publish AML guidelines about behavior that should be monitored (e.g., making numerous cash deposits or withdrawals over several days to avoid a reporting threshold). If an AML investigator uncovers behavior that exceeds reporting thresholds and has no apparent business purpose, they file a SAR/STR with the FIU to fulfill regulatory requirements.
• Sanctions compliance . Regulatory bodies such as the US Treasury Department, US Office of Foreign Assets Control, the United Nations, the European Union, Her Majesty’s Treasury and the Financial Action Task Force on Money Laundering have requirements for financial institutions to check transaction parties against lists of sanctioned individuals, companies, institutions and countries.

Technology & Anti-Money Laundering

A successful anti-money laundering program involves using data and analytics to detect unusual activities. This is done by monitoring transactions, customers and entire networks of behaviors.

As artificial intelligence technologies like machine learning become more prevalent, these next-gen AML technologies will automate many manual processes – helping to effectively identify financial crimes risks.

SAS financial crimes solutions include embedded machine learning and other advanced analytics techniques to drastically bolster anti-money laundering efforts. Techniques include deep learning, neural networks, natural language generation and processing, unsupervised learning and clustering, robotic process automation and more.

These techniques can be used for: 

• Suspicious activity monitoring – to uncover new schemes and detect increasingly sophisticated financial crimes tactics. 
• Intelligent alert prioritization – to triage alerts that warrant investigation and hibernate low-value alerts.
• Alert/case enrichment –to show AML investigators relevant images, prior cases, SARs, third-party data, maps, transaction history and more.
• Automated SAR filings via natural language generation and processing – to transform data into language and stories.
• A holistic entity view built from network analytics – to help you visualize and explore relationships in data. 
• Alert scoring with Bayesian algorithms – to relatively score all subjects of AML investigations.
• Client risk rating – for empirical scoring of money laundering risk exposure.
• Intelligent customer segmentation that builds smart peer groupings – to improve coverage across customers and/or accounts. 
• Peer-based anomaly detection – to identify abnormal behavior for a subject relative to peers.
• Rare-event detection – to identify those similar to a subject of interest (such as a law enforcement inquiry).
• Automated manual processes across the trade transaction life cycle – to detect patterns of illicit trade finance activity through optical character recognition.  

Four Types of Money Laundering

Trade-based money laundering Moving criminal funds through trade transactions (import/export of goods) to disguise their origins is known as trade-based money laundering (TBML). Some criminals carry out TBML by over- or under-invoicing for shipments. Other methods involve multiple invoicing (for the same shipment), misrepresenting the quality of the shipped goods, or shipping more – or fewer – goods than agreed.

Crypto/virtual currency and money laundering Crypto and virtual currencies have opened the door to new methods of laundering funds. For example, bitcoin ATMs can have “holes” with their AML compliance methods. And the degree of regulatory compliance by online cryptocurrency trading markets (exchanges) varies. Criminals use other methods too, such as “tumblers.” Tumblers are mixing services that split up dirty cryptocurrency, sending it through a series of different addresses and eventually recombining it into clean funds – for a hefty fee.

Drug trafficking and money laundering The illicit drug trade funds large, powerful and often violent criminal organizations. Drug traffickers must launder money to hide its origins, hide their identity, and prevent confiscation. Illegal drug transactions are sometimes done through avenues like dark web marketplaces. Some of the tactics drug traffickers use involve bulk cash smuggling, structured deposits, and money service businesses and currency exchanges.

Terrorist financing Terrorists financing their acts raise money and clean it through various methods. They hide the funds by preying on weaknesses in the financial system. Spotting these funds is challenging, unless a known terrorist or organization opens an account. Banks that spot an unusual or suspicious transaction are advised to file a report with the financial intelligence unit, which then undertakes a money laundering investigation.

Banks want to remain in compliance with ever-changing AML regulations and monitor growing transaction volumes while taking a risk-based approach. SAS can help.

SAS ® Anti-Money Laundering

In a world of evolving risks, it’s hard to keep pace as you manage alerts, test scenarios and work to maintain compliance with AML regulations. SAS Anti-Money Laundering is a proven platform that improves detection accuracy and can lower total cost of ownership. It provides transaction monitoring, customer due diligence, real-time sanctions and watchlist screening, and regulatory reporting – enhanced by advanced analytics capabilities like machine learning and robotic process automation.

Learn more about SAS Anti-Money Laundering

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The Challenges of Implementing Anti-Money Laundering Regulation: An Empirical Analysis

Zavoli, I. and King, C. 'The Challenges of Implementing Anti-Money Laundering Regulation: An Empirical Analysis' (2021) 84(4) Modern Law Review 740-771.

31 Pages Posted: 29 Mar 2022 Last revised: 28 Feb 2023

Ilaria Zavoli

School of Law, University of Leeds (UK)

The University of Sydney

Date Written: July 1, 2021

For over three decades, money laundering has been an area of concern for policymakers and law enforcement, with significant efforts undertaken at national and international levels to combat it. Recently, laundering of criminal proceeds using real property has attracted increased attention amongst policymakers. Various efforts are now being undertaken to tackle money laundering in the UK property market, but there are still significant difficulties in its practical implementation. Drawing upon semi-structured interviews with estate agents and compliance officials, this study identifies critical aspects of AML compliance that are particularly problematic for those involved in it. In so doing, this article delivers a new perspective, by analysing data gathered with the first empirical study on the implementation of AML obligations in practice (in the UK property market) since the introduction of the 2017 Money Laundering Regulations.

Keywords: money laundering, real estate, UK, AML, regulations, estate agents

JEL Classification: G18, K14, K20, K23, K42, M10, M14, M38, M42, M48, M51, N00, N20, N40, O17, P16, P35, P37, P48, Z18

Suggested Citation: Suggested Citation

Ilaria Zavoli (Contact Author)

School of law, university of leeds (uk) ( email ).

Liberty Building Leeds, LS2 9JT United Kingdom

HOME PAGE: http://https://essl.leeds.ac.uk/law/staff/247/dr-ilaria-zavoli

The University of Sydney ( email )

University of Sydney Sydney, NSW 2006 Australia

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Home — Essay Samples — Law, Crime & Punishment — Crime — Money Laundering

Essays on Money Laundering

Money laundering is a serious crime that involves disguising the origins of money obtained through illegal activities. It is a growing concern for governments and financial institutions worldwide, as it undermines the integrity of the financial system and facilitates criminal activities. As a result, many students and researchers are interested in writing essays on money laundering to understand its complexities and implications. However, choosing a suitable topic for a money laundering essay can be challenging. This article will provide a comprehensive guide to selecting the best money laundering essay topics and offer some examples to inspire your research.

Understanding Money Laundering

Before delving into specific essay topics, it is essential to have a solid understanding of money laundering. You can start your essay by defining money laundering, explaining its process, and discussing its impact on the global economy. This will provide the necessary background information for your readers and set the stage for a deeper exploration of the topic.

One interesting essay topic is the evolution of money laundering laws. You can explore the history of anti-money laundering regulations, starting from the first efforts to combat this crime to the modern legal framework. This topic allows you to analyze the effectiveness of existing laws, identify loopholes, and propose potential improvements to the regulatory framework.

Another compelling essay topic is the role of financial institutions in money laundering. You can investigate how banks and other financial entities have been used to facilitate illicit financial transactions and explore the measures implemented to prevent money laundering within the financial sector. This topic provides an opportunity to examine the responsibilities of financial institutions in combating money laundering and the challenges they face in fulfilling their obligations.

With the advancement of technology, money laundering techniques have evolved as well. You can write an essay on the impact of technology on money laundering, focusing on the use of cryptocurrencies, online payment systems, and other digital platforms to launder illicit funds. This topic allows you to analyze the effectiveness of current anti-money laundering measures in the digital age and propose innovative solutions to address emerging challenges.

Money laundering is not confined to a specific region or country. You can explore the global dimensions of money laundering in your essay, examining the interconnectedness of financial systems and the challenges of international cooperation in combating this crime. This topic provides an opportunity to analyze the role of international organizations, such as the Financial Action Task Force, in setting global standards for anti-money laundering efforts.

Money laundering has significant implications for developing economies, where the proceeds of crime can have a detrimental impact on economic development and stability. You can write an essay on the impact of money laundering on developing economies, addressing issues such as corruption, illicit financial flows, and the erosion of governance structures. This topic allows you to explore the social, political, and economic consequences of money laundering in the context of developing countries.

While financial institutions are often the focus of anti-money laundering efforts, non-financial businesses also play a role in money laundering activities. You can explore the vulnerabilities of sectors such as real estate, trade, and professional services to money laundering and discuss the measures that can be implemented to mitigate these risks. This topic provides an opportunity to examine the broader implications of money laundering beyond the financial sector.

Choosing the right topic for a money laundering essay is crucial for conducting meaningful research and producing a compelling piece of writing. Whether you are interested in exploring the legal framework, the role of financial institutions, the impact of technology, or the global dimensions of money laundering, there are various topics to consider. By selecting a well-defined and relevant topic, you can contribute to the ongoing discourse on money laundering and make a valuable contribution to the field.

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 Home / Anti-Money Laundering Articles / Anti-Money Laundering (AML) Policies Explained

Syedur Rahman | 5 September 2024 Share on: Contact The Author >

Anti-Money Laundering (AML) Policies Explained

Anti-money laundering policies are created by companies to identify - and prevent them being used by - money launderers.

It is worth explaining here that money laundering is the process of disguising the origin of money that has been gained from criminal activity. To give an example, someone who has earned wealth through large-scale drug dealing will look to move it and / or use it to make investments in order to make it difficult for anyone to realise how they obtained that money.

Money laundering is an activity carried out by organised crime groups in order to prevent any investigations being able to show that the money was gained through illegal activity. The UK’s National Crime Agency – the body created to tackle serious and organised crime – estimates that there is “a realistic possibility’’ that money laundering affecting the UK each year could involve hundreds of billions of pounds.

The scale of the threat posed by money laundering and the penalties for those who allow it to happen (which we cover below) mean it is vitally important for businesses to have an anti-money laundering (AML) policy in place. Only by having such a policy can a company be sure it is doing everything possible to identify and tackle the dangers posed by money laundering.

What is an AML policy?

In the UK, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (which have been amended since being introduced), the Proceeds of Crime Act 2002 and the Terrorism Act 2000 place obligations on businesses to be alert to the dangers of money laundering and to report any suspicious activity.

Creating an AML policy should be a major part of a business’ attempt to meet its legal obligations regarding money laundering. An AML policy is an essential part of detecting, preventing and reporting money laundering activities.

What types of business require an AML policy?

All companies could, in theory, benefit from having an AML policy. But many businesses should have such a policy because of the money laundering risk that they face and / or because they have to, due to regulations or the law.

The money laundering risk a company faces will depend on factors such as:

• The type of work it is involved in.
• The countries where it does its business.
• The types of clients it works for.
• The individuals, companies and organisations it deals with.
• Whether it is a regulated company – subject to the UK’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (which have been amended since their introduction).

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 apply to businesses that: 

• buy and sell property or businesses.
• manage money, securities (such as stocks, bonds and other financial. interests) or other assets for clients.
• open or manage bank, savings or securities accounts or are involved in the creation or operation of trusts, companies or other financial structures.
• organise contributions necessary for creating, operating or managing companies.

When a company is deciding whether it needs an AML policy, it should carry out an AML risk assessment to ensure it is fully aware of the potential threat of money laundering it faces.

Why is it important to have an AML policy in your business?

Having an AML policy can be the difference between a business being able to identify and manage the threat of money laundering and being prosecuted for allowing it to happen.

Not having an AML policy (or having one that is inadequate) can lead to a company facing massive fines, not to mention huge damage to its reputation. It can also result in a company’s senior figures facing criminal prosecution.

A person convicted under the UK’s Money Laundering Regulations can be jailed for up to two years and be fined. Anyone convicted of money laundering under the Terrorism Act can face up to five years in jail and a fine. Under the Proceeds of Crime Act, a person convicted of money laundering can be jailed for up to 14 years and fined.

The Financial Conduct Authority (FCA) will prosecute a business if it believes it is not meeting its obligations to prevent and tackle money laundering. To take just two examples, 2021 saw the FCA investigate HSBC and NatWest for anti-money laundering failings and not complying with anti-money laundering regulations. HSBC was fined £63.9 million and NatWest £264.8 million.

Having the right AML policy in place should, therefore, be at the heart of many companies’ activities.

What should be included in an AML policy?

The type of AML policy a company requires will depend on factors (mentioned earlier in this article) such as the type and location of its work, clients and trading partners, and the regulations that apply to it.

But whatever the precise nature of a company’s activities, its AML policy needs to include:

• Specific details of its money laundering prevention strategy, including the roles given to named individuals and how the strategy relates to any AML risk assessment that has been carried out.
• A full explanation of the company’s methods for locating, verifying, monitoring and conducting due diligence on customers.
• Plans for educating staff about their anti-money laundering obligations and ensuring they fully understand the procedures in place for reporting any suspicions.

There should be a full written record of the AML policy. This is important for ensuring it can be referred to by staff but also because it may be asked for by regulators if they investigate a suspected incident of money laundering.

It is also important that the company reviews its AML policy on a regular basis and / or when there are any significant changes regarding the nature of its work.

How to Create an AML Policy

Creating an AML policy is an important task for a company. It has to be carried out correctly, otherwise it will fail to identify and prevent money laundering. At some point, the policy may also be subject to examination by the relevant authorities.

Due to its importance, a company wanting to create an AML policy could seek advice from professionals with the relevant expertise.

Every AML policy may be slightly different, due to each company’s particular circumstances. But generally, devising an AML policy involves addressing a number of issues:

• Defining the AML policy’s aims : The policy needs to explain in its introduction what its purpose is and the reasons why it has been created.
• Appointing a compliance officer : A person with the relevant expertise has to be chosen to take charge of AML compliance in the business. It will be their responsibility to examine existing anti-money laundering procedures, see where improvements can be made and, if necessary, propose new policies to ensure the company is meeting its AML obligations.
• Sharing data with the authorities : Businesses have to report their AML findings to the relevant authorities. Each business should detail in its AML policy exactly how this will be done.
• Sharing with other financial institutions : An AML policy should explain whether the company intends to share its anti-money laundering information with other companies, and precisely how it will do this. Sharing data with other companies is not compulsory but it can help a business comply with its AML obligations.
• Sanctions list cross-checking : Companies have to make sure anybody they intend to have a business relationship with is not on any sanctions list. An AML policy must state how such checks are made and how the company will ensure it is aware of any sanctions updates.
• Client verification : An AML policy has to detail how a business verifies the identities of those it does (or plans to do) business with.
• Customer due diligence : A business has to say how it will carry out due diligence - the necessary checks to be made before going into business with someone - on individuals; including the beneficial owners and senior management of other companies and politically exposed persons (PEPs).
• Filing suspicious activity reports : In the UK, meeting AML obligations involves a company making a suspicious activity report to the National Crime Agency. An AML policy has to outline the company’s procedure for this. 

The Benefits of a Robust AML Policy

Creating an AML policy may be regarded as a chore by many in business. But such a policy is a legal duty for many businesses.

While an effective AML policy is a vital weapon in the battle against money laundering, it can also bring benefits for a company.

These include:

• Reducing the chances of the company failing to meet its legal or regulatory obligations – and suffering the penalties that could follow.
• Improving its risk management.
• Providing protection against those looking to involve it in financial crime.
• Ensuring a company’s reputation and position in its business sector is not damaged by participation (knowingly or unknowingly) in illegal activity.

There is little doubt about the scale of money laundering. The exact amounts of money involved are, for obvious reasons, unknown. But it is a huge problem – and one that poses a danger to many companies.

Those in business must ensure they do all they can to minimise the risk money laundering can pose to them. Creating an AML policy that reflects this risk is a large part of a company’s defence against the dangers of money laundering. 

For some companies, this may appear to be a daunting challenge. But at Rahman Ravelli, our money laundering and compliance specialists are experts when it comes to devising AML policies that meet the needs of companies in each and every business sector.

About The Author

Syedur Rahman Partner

[email protected] +44 (0)203 910 4566 vCard Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes. View Author Profile >

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The FATF Recommendations set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Countries have diverse legal, administrative and operational frameworks and different financial systems, and so cannot all take identical measures to counter these threats.

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• Consolidated FATF Standards on Information Sharing This document groups the relevant sections on information sharing from the FATF Recommendations, to clarify the types of information that should be shared, when it should be shared and the safeguards and protections that should apply to sharing information.
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Anti-Money Laundering

Introduction.

Financing entities are entrusted with the responsibility of eradicating misconduct by withholding support. They strive to institute measures that prevent them from processing corrupt payments. However, financial systems are vulnerable to crisis, especially when they are unable to absorb shocks. Anti-money laundering compliance requirements increase complexity and costs for banks globally. Despite the regulatory changes being the basis to increase financial system resilience and intervention of financial crimes, they increase pressure on the correspondent, interfering with their functioning. Also, they act as a barrier to cross-border financial networks and banking relationships. There is a need for a compelling business case to upgrade a bank’s anti-money laundering capabilities. Leading banks in emerging markets can be supported since they hold strong positions in maintaining and growing cross-border banking networks. Expectations for continuous improvement in anti-money laundering compliance pervade the international financing systems. Financing institutions must fathom the business implications of money laundering alongside implications for criminality and security. They should focus on identifying additional and efficient compliance requirements and formulate ways to excel in anti-money laundering. Different countries and institutions provide different support regarding regulatory guidance towards anti-money laundering. This literature review attempts to discuss financial system alignment to address anti-money laundering.

Mekpor, E.S. (2019) “Anti-money laundering and combating the financing of terrorism compliance,”  Journal of Money Laundering Control , 22(3), pp. 451–471. Available at: https://doi.org/10.1108/jmlc-09-2018-0057.

Emmanue Senanu Mekpor, a Doctoral researcher in the department of finance at Brunel University London, investigates the country’s practices to comply with anti-money laundering regulations. He recommends adoption and compliance with Financial Action Task Force (FATF). He argues that money laundering can be reduced or mitigated by using these guidelines and recommendations. These recommendations are critical for Canada to utilize in fighting anti-money laundering, which has prevailed in many parts of Canada. It is an obstacle to Canadians’ quality of life, safety as well as security. FATF recommendations process access to information on compliance and adoption of the correct measures. This can help Canada reorient its anti-money laundering policies and regulations and focus its efforts on the parts lacking approaches to AML. Canada acquires guidelines on how to make alterations to AML frameworks and thus ensure the effectiveness of regulatory practice. These changes to anti-money laundering impact CPAs concerned with activities protected by the Proceeds of Crime (Money Laundering).

Wheeler, J. (2021)  AML technology: Where companies should invest ,  Jumio . Available at: https://www.jumio.com/aml-technology/

Jackie Wheeler, a Fiscal Analyst in the greater Seattle region, pursues her research interests in developing AML technology that she believes would boost compliance. She perceives money laundering as a financial crime that is currently common, and businesses can be manipulated to finance criminal enterprises without their knowledge. She suggests technologies such as automatic AML screening since financial institutions serve widely diverse clients whose intentions are unknown. Transaction monitoring tools are useful in identifying suspicious activities. An increased amount of illicit funds is observed to be laundered in the Canadian economy yearly. This is due lack of proper ways of identifying money launderers. Automatic screening ensures that the country keeps track of all the customers against international and national checklists. It minimizes risks and helps a country to undertake its due diligence, especially when it encounters new clients. Thus, customers’ identities should be verified, as risks of associating with them. Canada should incorporate advanced software that monitors individual transactions. It identifies high-risk transactions as well as their patterns, thus the follow-up for money laundering. Financial institutions detect financial crimes and determine how to end them effectively. Also, artificial intelligence can be applied in the financial ecosystem to reduce money laundering risks.

Faccia, A. (2021)  Electronic money laundering, the dark side of Fintech: An overview of … ,  Researchgate . Available at: https://www.researchgate.net/publication/347312080_Electronic_Money_Laundering_The_Dark_Side_of_Fintech_An_Overview_of_the_Most_Recent_Cases (Accessed: February 16, 2023).

Alessio Faccia currently works at Coventry university in the department of finance and accounting and Economics. Her research interest extends to technology and innovation; thus, she explains the contribution of the rapidly growing fintech sector to money laundering. She focuses on the most critical issues regarding transactions’ reliability, legality, and security. It is a research primarily addressed to economic players offering payment services, for example, cryptocurrencies or financial services, especially those managed by the use of technology advanced ways. Canada continues to embrace digital technologies and the internet. This can expose it to risks and threats of advancement in technology. Financial institutions and most businesses in Canada rely on digital technologies hence cyber security risks. The country has several fintech such as the multiplatform banking firm Wealthsimple and Bitcoin miner Blockstream.

Labib, N.M. (2021)  Survey of machine learning approaches of anti-money laundering … ,  research gate . Available at: https://www.researchgate.net/profile/Nevine-Labib/publication/340424014_Survey_of_Machine_Learning_Approaches_of_Anti-money_Laundering_Techniques_to_Counter_Terrorism_Finance/links/625d9db4709c5c2adb84ed2f/Survey-of-Machine-Learning-Approaches-of-Anti-money-Laundering-Techniques-to-Counter-Terrorism-Finance.pdf

Dr. Nevine Makram Labib is the computer and information systems department leader in Sadat Academy’s faculty of management sciences. He analyzes machine learning approaches to anti-money laundering and discovers that money laundered in a year across the globe is approximately 5% of global GDP. He points out that criminal money launderers use financial institutions to exploit weak global financial systems to disguise their illicit funds. Financial institutions are obliged by law to monitor and provide reports of suspicious transactions. RCMP in Canada is less involved in money laundering and lacks the expected expertise to manage proceeds of crime investigations. This gap has a negative impact as it is the basis upon which money laundering has increased in Canada. Moreover, currently, there is nobody in Canada responsible for performing money laundering investigations. This has contributed to the intensification of money laundering in various sectors, such as the gaming sector.

Tarmizi, M.A. (2019)  (PDF) compliance determinants of anti-money laundering regime among … ,  research gate . Available at: https://www.researchgate.net/publication/361716083_Compliance_determinants_of_anti-money_laundering_regime_among_professional_accountants_in_Malaysia (Accessed: February 16, 2023).

Masetah Ahmad Tarmizi is a senior lecturer in the faculty of Accountancy at the University of MARA. He investigates the extent of data content, internal control, and compliance of accounting professionals to the anti-money laundering regime. Professional accounts are presumed responsible for implementing compliance programs and informing the authorities of illegal practices. They are expected to keep track of their clients as well as the due diligence of the customers. The complexity of money laundering poses a challenge due to the lack of adequate evidence to support money laundering practices in Canada. Despite the federal government enforcing complex legislation to address money laundering, the regime has been ineffective, thus increasing illicit funds activities. The failure is attributed to agencies such as FINTRAC, whose role is to receive and evaluate information about money laundering threats and risks and later communicate them for analysis and law enforcement.

Cassella, S. (2019)  Bulk cash smuggling and the globalization of crime: Semantic scholar ,  Berkeley Journal of International Law . Available at: https://www.semanticscholar.org/paper/Bulk-Cash-Smuggling-and-the-Globalization-of-Crime-Cassella/5427c9be8e2dc06a409107c14637ef7956799c86 (Accessed: February 16, 2023).

Stefan Cassella specialized in money laundering and asset forfeiture and worked in the field for over thirty years. He explains the globalization of crime by highlighting that money laundering criminals travel from one country to another. He relates this to how tourists freely move from one place to another. Money launderers move intending to cover their proceeds from one residence to another. Further, he elaborates on tools used to initiate international fraud schemes, such as; internet connection and internet devices such as computers. Law enforcement is based on a country’s laws and traditions; for example, what is unlawful in Canada may be unlawful in another state, thus the increased rates of transnational money laundering. Canada presents itself as a liberal democracy and allows people across the globe to use its financial institutions. However, it has a regime to counter transnational organized money laundering.

In Conclusion, this literature review has provided various sources that address the alignment of financial systems to anti-money laundering. These sources are the foundation for the detection of money laundering practices as well as the guidance to curb illegal practices. For example, the first source reveals that adopting the Financial Action Task Force (FATF) by all countries across the globe helps them share in managing money laundering. A manager should be aware of three major observations regarding this topic. First, technology plays a key role in money laundering. In the modern world, despite the wide advantages of technological advancements, people misuse this power and develop unlawful and illegal practices supporting money laundering, such as cybersecurity. Second, financial institutions are the central feature of money laundering practices. They are widely distributed across the globe, and people perform illegal transactions to disguise illicit funds. A nation can secure its security and integrity of financial systems by strengthening the global chain. Third, money laundering requires a holistic approach to combat those practices and monitor tax evasion. Anti-money institutions’ collaboration with law enforcement can have a positive impact on the control of the issue. This cooperation helps in setting standards and requirements that promote the effective implementation of operational, regulatory, and legal measures for preventing money laundering. Additionally, it leads to the development of common international policies, helping a country stay ahead of criminals.

Bibliography

Cassella, S. (2019)  Bulk cash smuggling and the globalization of crime: Semantic scholar ,  Berkeley Journal of International Law . Available at: https://www.semanticscholar.org/paper/Bulk-Cash-Smuggling-and-the-Globalization-of-Crime-Cassella/5427c9be8e2dc06a409107c14637ef7956799c86

Faccia, A. (2021)  Electronic money laundering, the dark side of Fintech: An overview of … ,  Researchgate . Available at: https://www.researchgate.net/publication/347312080_Electronic_Money_Laundering_The_Dark_Side_of_Fintech_An_Overview_of_the_Most_Recent_

Labib, N.M. (2021)  Survey of machine learning approaches of anti-money laundering … ,  research gate . Available at: https://www.researchgate.net/profile/Nevine-Labib/publication/340424014_Survey_of_Machine_Learning_Approaches_of_Anti-money_Laundering_Techniques_to_Counter_Terrorism_Finance/links/625d9db4709c5c2adb84ed2f/Survey-of-Machine-Learning-Approaches-of-Anti-money-Laundering-Techniques-to-Counter-Terrorism-Finance.pdf

Mekpor, E.S. (2019) “Anti-money laundering and combating the financing of terrorism compliance,”  Journal of Money Laundering Control , 22(3), pp. 451–471. Available at: https://doi.org/10.1108/jmlc-09-2018-0057.

Tarmizi, M.A. (2019)  (PDF) compliance determinants of anti-money laundering regime among … ,  research gate . Available at: https://www.researchgate.net/publication/361716083_Compliance_determinants_of_anti-money_laundering_regime_among_professional_accountants_in_Malaysia

Wheeler, J. (2021)  AML technology: Where companies should invest ,  Jumio . Available at: https://www.jumio.com/aml-technology/

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