(Anti-Money Laundering / Countering the Financing of Terrorism)
š¹ Definition
AML/CFT stands for Anti-Money Laundering and Countering the Financing of Terrorism. Together, these refer to the legal, regulatory, and operational measures that governments and businesses implement to detect, prevent, and report financial activities connected to money laundering or terrorist financing.
AML/CFT frameworks are developed based on recommendations from international bodies such as the Financial Action Task Force (FATF). These measures require regulated entitiesāsuch as banks, corporate service providers, fintech firms, and other designated businessesāto conduct customer due diligence (CDD), monitor transactions, maintain proper records, and report suspicious activity to relevant authorities.
AML/CFT compliance is a global obligation and forms the backbone of responsible financial and business operations in both traditional and digital economies.
š¹ Frequently Asked Questions (FAQs)
Q1: Whatās the difference between AML and CFT?
AML focuses on preventing criminals from disguising the origins of illicit funds (e.g., from drug trafficking, fraud, corruption), while CFT targets the detection and disruption of financial flows intended to support terrorist acts or groups. The two are often addressed together because they involve similar methods and controls.
Q2: Who must comply with AML/CFT regulations?
A wide range of businesses must comply, including:
- Banks and financial institutions
- Cryptocurrency exchanges and wallet providers
- Corporate service providers (CSPs)
- Real estate agents, lawyers, and accountants
- Payment service providers and crowdfunding platforms
Q3: What are the key components of an AML/CFT program?
Typical components include:
- Risk-based customer due diligence (CDD)
- Enhanced due diligence (EDD) for high-risk clients
- Ongoing transaction monitoring
- Suspicious transaction reporting (STR)
- Staff training and internal controls
- Periodic compliance audits
Q4: What happens if a company fails to comply with AML/CFT laws?
Non-compliance can lead to serious consequences, including:
- Regulatory fines and penalties
- Loss of operating licenses
- Reputational damage
- Legal prosecution of responsible individuals or management
