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Definition of AML: AML stands for anti-money laundering, the practices intended to stop misappropriated funds being passed off as legitimate.
The term anti-money laundering refers to the set of laws, regulations, and procedures in place to prevent money laundering.
Money laundering is the process criminals use to disguise illegally obtained funds as a legitimate income, which involves ‘washing’ the proceeds of financial crime. This is done by integrating the ‘dirty’ money into the financial system, so it looks like it was earned legitimately.
There are three distinct stages of the money laundering process – placement, layering and integration. You can find a more detailed breakdown of these steps over on our dedicated money laundering page.
So, what are AML checks and what do they require? Anti-money laundering checks are a key component of the global anti-money laundering effort. They typically involve ID verification, as well as the screening of potential clients and customers to determine the level of risk they might pose to your business.
In line with EU money laundering directives, every business in the regulated sector is legally obliged to adopt a risk-based approach, which entails checking new clients and customers against:
International sanctions lists
PEP lists
SIP lists
These checks enable you to identify any high-risk customers, and perform enhanced due diligence (or EDD) wherever necessary.
Enhanced due diligence is a more in-depth process of investigation, and generally includes adverse media checks, which will shed light on the reputation of the individual or business within the industry, and could reveal historic indiscretions. If you’re considering a deal with a high-risk customer, you should also continuously monitor sanctions and PEP lists as part of your enhanced due diligence, to ensure you’re aware of any changes in their status.
Simply put – AML checks and EDD allow you to make an informed decision when going into business with a new individual or business, with clear visibility of any risk they pose to your firm.
AML and KYC are often used as interchangeable terms, but they don’t have the same definition. AML, which stands for anti-money laundering, usually refers to the regulations, laws and measures in place to try and deter criminals by making it harder for them to disguise the proceeds of financial crime.
Meanwhile, KYC – which stands for know your customer – is a series of checks that must be carried out as part of your risk-based approach to AML compliance.
KYC and KYB (know your business) checks are often the first stage when onboarding a new potential client or customer, and they essentially verify the identity of an individual or business.
Now that you have a top level answer to ‘what are AML checks?’, you might be wondering how to become AML compliant. SmartSearch works with thousands of businesses to help them combat money laundering and use innovative technology as a solution to time-consuming onerous checks.
AML is a complex, ever-evolving process, and your compliance measures must always reflect the most recent regulations – which can be imposed at a national or international level.
As well as this, AML checks themselves are time-consuming and expensive to carry out manually, and often require the presence of physical documents from each customer or client.
The answer? Electronic AML checks from a trusted provider, like SmartSearch.
SmartSearch is an end-to-end electronic AML platform, which encompasses every stage of the process, from initial checks and KYC, right through to sanctions screening and ongoing monitoring. What’s more, our industry-leading platform is completely automated, making manual checks a thing of the past – and with access to global databases like the Dow Jones Watchlist, you can count on our service to be as accurate as it is fast.
Join over 6,500 companies who use SmartSearch’s platform to conduct their anti money laundering checks. Book a free demo today.
Integrate SmartSearch’s cutting-edge AML platform into your CMS or management software to conduct AML checks quickly and accurately. Confirm customer identity within 2 minutes and find out whether they have sanctions, are PEPs, SIPs or have relatives or close associates with red flags.
The outcome of anti-money laundering is knowing that who you intend to do business with is not laundering money through your business. Electronic AML checks can quickly identify whether the individual has any red flags for this.
Failing to do due diligence can leave you subject to money laundering penalties such as fines. Don’t let money laundering operations use your business to wash their illicit funds.
The core goal of AML checks is to verify the identity of an individual and flag any risks they represent. This is a crucial step for many industries, in particular regulated industries such as the property and legal sectors. However, we can work with a wide range of sectors, including emerging markets such as cryptocurrency and gaming. We’re always collaborating with our clients to ensure our AML checks meet their individual requirements.
