AML compliance for some people is complicated. However, here are the 5 main steps needed to achieve the necessary results:
1. Conduct a risk assessment on a business level
Conducting a risk assessment is a critical step in developing an effective AML Compliance program. The objective of a risk assessment is to identify the specific risks and vulnerabilities that the business may face related to ML/TF. The process is comprised of the following processes:
Identify the risks
Assess the likelihood and impact of each risk
Determine the controls to mitigate the risks
Identify gaps and weaknesses
Develop an action plan
Determine the residual risk
2️. Appoint an AML Officer
The purpose of the AML department is to oversee the implementation and maintenance of the AML program. The team members must have the necessary skills, experience and knowledge to manage the AML program effectively.
3. Develop appropriate policies and procedures (including Customer Due Diligence - CDD)
Customer Risk Assessment
Know-Your-Customer (KYC) procedures
Identify High-Risk Customers and Enhanced Due Diligence (EDD) measures
Ongoing monitoring of transactions
Identification and reporting of suspicious transactions
4. Conduct employee training
Employee training is a vital component for successfully implementing an anti-money laundering (AML) program within regulated entities. Neglecting to provide adequate training can result in the entity being held liable and subjected to penalties.
5. Ensure regular independent audit
According to the size and nature of the activities of a regulated entity, an independent audit function must be established if required by the supervisory authority.
It's easier said than done however, with sufficient expertise it is possible to establish and maintain a solid AML program that will protect the company from potential penalties, sanctions by the regulator, and other financial and reputational risks.