While establishing a business, there are plenty of things that need to be taken into consideration in order to ensure its productivity. Not just putting the capital or setting up the infrastructure, there are plenty of other elements as well that has to be taken care of. As an entrepreneur, you must be careful to adhere to all the essential elements that will help you in making your business successful.
When it comes to business that involved dealing with a heavy flow of money, the security of the revenue becomes a significant concern. The technology has been both boon and bane for the business world. While technology has significantly contributed to enhancing the functions, there have been some loopholes that have resulted in adverse effects on the financial system. Money laundering is one such criminal activity where the origin of the illegal money is concealed by passing it through a series of transaction. The unlawful money after the complex banking transfers returns to the launder in an indirect way.
It is an unlawful practice that can put financial systems in grave danger. Hence, it is essential to deploy stringent law enforcement. There are many jurisdictions that have already set up a sophisticated monitoring system and financial laws that can seamlessly detect the money laundering practices.
What is AML?
Money laundering has become a growing concern in the company. Anti-money laundering is basically a group of laws, procedures, and regulations that helps in preventing criminals from concealing the origin of the money and deem it as legitimate income. Money laundering can create severe disruption in the financial system. Hence, it is essential to strictly follow the AML guidelines and pay attention to the AML alerts. While AML only has a limited set of laws and regulations for the criminals, the implications of such laws are far-reaching that has proven to be beneficial for creating a secured financial system. For instance, AML laws ask the banks and other financial institutions that are engaged in providing credit to customers and opening their account to ensure that they are not indulged in any sort of money laundering.
There are even AML compliance officers that are appointed to overlook whether he concerned company is following anti-money laundering policies.
Anti-Money Laundering: The History
Money laundering was a part of the financial system from decades, but the anti-money laundering came into prominence in 1989. It was after when a group of countries formed the Financial Action Task Force (FATF) to promote the anti-money laundering standards and prevent money laundering.
After the 9/11 terrorist attacks, FATF was forced to expand its horizons in an effort to secure the finances from terrorist breaches. IMF or International Monetary Fund was also unveiled in the fight against the activities of money laundering. IMF also formed a 189 members committee to comply with AML standards against terrorist financing.
How Anti Money Laundering Works?
As mentioned earlier, anti-money laundering is a set of rules and laws, and it targets the criminal activities witnessed in the market. It can be in the form of market manipulation, illegal trading of goods, exhaustion of public funds and anything that involves hiding the source of the money involved. Criminals launder the money by running the money through a series of untraceable transactions to showcase them as legitimate money. Furthermore, the money launders an also sneak the money into abroad countries and deposit it in smaller instalments to make it untraceable on the records.
It is important to note that financial institutions hold great prominence in the economy. Hence, they should be appropriately trained to handle criminal activities like money laundering. Anti-money laundering trains the employees to detect and report illegal activities happening in the financial system. There are several companies that have been providing anti-money laundering investigation services. Furthermore, there is AML software as well that are being increasingly used to suspect, detect, and alarm the concerned officials regarding the criminal activity.
What is AML Holding Period?
It is one of the efficient ways of detecting money laundering activities. There are many anti-money laundering methods, and one of the reformed ways is AML holding period, wherein the deposit in a bank or any financial institutions are required to remain there for a minimum time period. Generally, the time of AML holding period is five trading days. Such holding of deposits in the bank helps in risk management and anti-money laundering.
The Bottom Line
Money laundering can grow into a severe issue, creating disruption in the financial system. Hence, it is essential to follow the AML guidelines and pay attention to the AML alerts. There are several companies that have been providing with anti-money laundering investigation solutions to other institutions. It is essential to prioritize the need for AML and AML KYC in order to ensure that there is no chance for illegal sourcing money.
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