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Responsibilities of Businesses

A number of industry sectors have been identified as being used by criminals to launder money, such as Banking, Insurance, Real Estate, Gaming (Casinos), etc. Therefore, for these sectors, the Regulators require an AML process to be in place to prevent criminals from using these sectors to launder money. Each of the affected organisations must assign an AML Compliance Officer (MLCO). These MLCO’s will be the people that ensure AML processes are carried out in their organizations. Compliance Officers need to comply with the Regulators' requirements on AML, though the exact job scope of a Compliance Officer may vary for different organizations and industry sectors.

The most common responsibilities of organisations Compliance Officers include:  

1.  Suspicious Activity/Transaction Detection: 
The MLCO needs to be equipped with the means to detect suspicious activities. When detected, the MLCO needs to take action. For example, if a client who has a monthly income of €3,000 suddenly tries to purchase a motorboat valued at €90,000 in one transaction, the AML process and systems need to alert the MLCO. The MLCO will need to verify with the client to ensure that the money is clean. In the event that the Officer is not satisfied that the money is clean and after completing the necessary checks, they might need to create a Suspicious Activity Report (SAR) for internal review and possibly for submission to the relevant Authorities / Regulating bodies.

2.  Background Check:
The AML Compliance Officer (MLCO) will need to check the background of potential clients and for existing clients conduct periodic checks to ensure that their clients are not laundering any money using their accounts, company structures or operating practices. The MLCO should be equipped with access to the key global databases of sanctioned entities, politicians and their relatives/associates. They need to be able to screen their client's names against the database and see if there is any name matches. Depending on the nature of the business model, additional sources of background information may be required to reduce the risk profile of their client base.

Ideally, there are no name matches, as it would mean that the MLCO will have no non-standard action to take. In the event that there are matches, the MLCO needs to go through the process of verifying each PEP or Sanctions match to ensure that it is not a false match, i.e. same name but not same person. In the event that the match is confirmed, they will need to escalate the matter internally so that the appropriate action can be taken.

In the event that the standard due diligence identifies the potential client as being high risk, the MLCO is required to do a more in-depth background check called an Enhanced Due Diligence

Having the right processes, systems and personnel in place is vital for organisations to prevent themselves from inadvertently helping to launder money and prevent the fines from Regulators too!

When you have lapses in your AML processes, this could happen to you:  

 HSBC pays out £28m over money-laundering claims
 Barclays fined £72m over 'elephant deal'
 Standard Chartered fined $300m by US financial watchdog
 Citigroup to Close Banamex USA Unit, Pay $140 Million Fine
 RBS is fined £62m in the US for breaching sanctions against Iran
 UBS fined $13 million in money laundering fraud
 Deutsche Bank fined $258m for violating US sanctions

A Sample AML & KYC Compliance Framework 

Here is a sample compliance framework for AML and KYC processes. These steps form the backbone of any AML compliance solution and are what is being sought by the AML monitors from the relevant regulatory bodies.