aml screening checklist

AML Screening Checklist - Ultimate Fundamentals And Processes

  • By Oliver Johnson
  • 14-10-2019
  • Artificial Intelligence

Over the course of many years, it is noticed that a large number of Anti-money Laundering (AML) failures are underpinned as a result of insufficient customer screening. The organizations fail to authenticate the customer either at the onboarding stage or even during the customer’s tenure. The greater the risks will be associated with the customer, the most outrageous screening lapse will be. These discrepancies result in reputational damage and harsh penalties by local regulators.

The customer activities should be monitored even after the primary screening processes. In the case of AML screening failure, there could be a link with the facilitation of sanction breaches, highly-toxic customer behaviors, drug trafficking, and other criminal activities. Whilst customer screening is not enough. It is just a primary step to demonstrate that your business does not facilitate criminals. But, after the first step, there should be continuous monitoring and screening of customers to avoid ruinous circumstances.

For a functional society, AML screening is the critical first step of an effective program. It is important for the decision-maker of your organization to understand the true value of AML compliance. This is crucially important to ensure that all AML fundamentals are fulfilled. It would help your business to avoid hefty regulatory fines.

Following are the Fundamentals and processes of AML:

Compliance and Policies:
Each jurisdiction comes up with specific requirements. But, there exist a subset of terms that are applicable and mandatory for the business around the globe. Think carefully through the policies. Openly present the company policies before staff, executives and regulators to demonstrate your compliance plan and procedures. Elaborate on the methods of how the company deals with customer services, how important identification is, the purpose and methods should also be mentioned. For regulators, make sure that your business complies with local regulators, develop a report illustrating all the norms and standards clearly.

Red Flags Detection:
Customer screening does not end at the first authentication process. There should a consistent eye on the activities of the customer in the network. Remember, in money laundering embezzle funds are turned into good money and then it is laundered anywhere across the world. Look at the unusual activities. Money launderers have smart ways to convert ill-gotten gains into legal money. Although it is hard to track the money flow but the patterns can definitely be analyzed by continuous monitoring. Following are some red-flags that represent unusual behaviors of customers:
- Huge cash transaction
- A large number of small transactions
- Gambling transactions i.e. cash-heavy business transactions
- Transactions to the criminals previously involved in money laundering
- Transactions to businesses having money laundering record

These activities need to be monitor continuously on a serious scale. Any suspicious transaction should be halt immediately to curb the risks of money laundering and terrorist financing.

AML Screening and Monitoring:
The customer profile should be monitored entirely. Suspicious accounts can be risky for your business. A comprehensive identity verification process can help in filtering out bad actors from good ones. It would help in reducing the risks of your business as a source or destination of dirty money. Fraudsters use sophisticated methods to fool the fraud prevention system. To combat this, AML screening methods should be innovative enough to stay one step ahead of these scammers.

Customer Due Diligence (CDD) processes should be taken in place to screen the customers through sanctions lists, criminal lists and PEPs records. It is necessary to authenticate your customers and make sure that they have not been part of any criminal activity before. Screen the customer from government data sources, law enforcement agencies, and international regulators databases. Also, monitor the transaction thresholds and suspicious activities happening in the system.

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