The business works with a huge network of third-party and business relationships, a large number of vendors, suppliers, and intermediaries. With a massive dealing network, sometimes it gets hefty to look onto the privacy policies of businesses individually, which results in a heavy cost when something wrong happens unexpectedly. Not only for large businesses but also small businesses become prey to huge losses and reputational damages. Such loss can be produced as a result of Anti-money Laundering (AML) Compliance lack in businesses. It is crucially important to deal with the basic compliance issues beforehand instead of waiting for a thrilling incidence that can harm your business in unexpected ways.
The basic compliance programs, AML/KYC compliances are not only limited to financial institutions but are applicable to all the online businesses that are directly or indirectly connected to the user and client-side. While running a legitimate business, two main questions should be carefully catered. First question is, ‘Does your business comply with the local regulators and compliance programs?’. Secondly, ‘What is the status of your business parties regarding local regulators?’. Regulatory laws are now extended to business relationships as well. It is the ultimate responsibility to ensure that your business relationships are secure and comply with federal and local regulations wholly.
Know Your Vendor
Just like banks and financial institutions, business needs to know their beneficial owners thoroughly. Just knowing the name and kind of business is not enough. It is important to know the entity and beneficiaries in order to avoid adverse circumstances.
Avoid dirty money, money that comes from criminal activities, terrorists and corrupt politicians, etc. Such money can sneak into the business chain while lessening its value. As a result, severe penalties, fines, business losses, and repetitional loss can resentfully affect the business. To deter these risks, it is important for legitimate businesses to use the ways that banks use to know their customers. For this Know Your Customer (KYC) entirely to comply with the respective regulations.
Go through the customers and vendors through the AML screening process that should be efficient, cost-effective, reliable and comprehensive enough. Governments have introduced a large number of sanction lists through which each customer should go through in order to allow only trusted identities to become part of the system. These sanction lists are based on identities that are globally enlisted as criminals or money launderers. To keep the businesses away from money laundering activities and fraudsters, AML screening is an important part.
According to a 2019 survey, 56% of sanction violation fines levied globally. Not only financial institutions but other businesses need to reduce the risks of online fraud and oblige with the AML compliance to introduce soundness in the systems. Below is an AML watchlist according to which businesses should mold their system:
Diverse and Comprehensive data from Official Sources
In this financial world, the interconnection of financial institutions and entities has made it possible for the roaming money laundering to use unseen tricks in order to illegally transfer data across borders. Such terrorist and money laundering activities are happening almost everywhere around the world. Therefore the steps have been taken to deter the risks. For this purpose, diverse data is required from official sources that include international regulators sanction lists, databases, and sources from law enforcement agencies.
In the customer onboarding process, identify and verify the identity of the particular individual requesting the payment procedure. Apply AML checks for identity verification. Verify the person against the sanction lists and records and allow further processing if the person is authenticated as a real and naive person.
Individuals in electronic records keep on updating around the globe. Either added or removed from time to time. The screening program should be effective enough and keep updated with the global AML electronic records. Otherwise, criminal identities can keep unchecked against the AML databases that can cost the business afterward.
Integrate robust APIs
Financial institutions, the banking industry, and online several online stores have invested a lot on their systems. The integration of third-party tools can help them provide a robust, sound, and reliable system to their users. Also, businesses can ensure the AML background checks that are already part of identity verification APIs providing a better customer experience at the same time.
Many times media is ahead of the government and official announcements while figuring out the problems and fraud happenings. Media coverage can help businesses creating alarm in the organization regarding media mentions and if they are somehow related to their business. This can help the business keep updated with the latest news and names that can directly or indirectly influence it.
Automate the Workflow
Automating the workflow can help businesses in reducing human labor, streamlining the workflow, and automatic auditing and record keeping. The processing time will be reduced providing customers a robust onboarding process. Also, AML background checks implemented in the system ensure automated individual AML screening.
Continuous monitoring is important to track criminal activities all the time. One-time monitoring is not enough to keep the system away from the entrance of fraudsters. Integrate the services that provide the facility of continuous monitoring over the traffic that is entering into the system, proceeding with identity verification and payment procedure.
For any business, it is important to identify loopholes in the system with a criminal mind. This will help in identifying the risks as a risk-based approach that identifies the list of risks that can be alarming for the system. In this way, before an attacker exploits the particular loophole, it is already fixed by the technical team itself.
To conclude, these steps can help businesses design an AML watchlist to protect their businesses from the money launderers and similar bad actors. A legitimate business is said to be the one that caters to all the risks that can become hurdles towards its productivity. Implementation of AML screening procedures and checks to be aware of the incoming and outgoing traffic.