🔹 Definition
Anti-Money Laundering (AML) refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. AML frameworks are designed to detect and report suspicious financial activities, especially those related to fraud, terrorism financing, tax evasion, corruption, and organized crime.
Financial institutions, corporate service providers (CSPs), and other regulated entities are required by law to implement AML policies and controls. These typically include customer due diligence (CDD), transaction monitoring, record-keeping, and suspicious transaction reporting (STR). AML compliance is a global standard led by organizations such as the Financial Action Task Force (FATF).
🔹 Frequently Asked Questions (FAQs)
Q1: Why is AML important for businesses?
A1: AML regulations protect businesses from being misused for illicit financial activities. Non-compliance can lead to legal penalties, reputational damage, and even loss of license in regulated industries.
Q2: What are the basic components of an AML program?
A2: A standard AML program includes customer identification and verification (KYC), risk assessment, transaction monitoring, ongoing due diligence, employee training, and reporting of suspicious activities to authorities.
Q3: Is AML mandatory for non-financial institutions?
A3: In many jurisdictions, yes. Besides banks, sectors like real estate, law firms, accounting firms, and CSPs are also subject to AML laws, especially when dealing with large transactions or acting on behalf of clients.
Q4: What is the difference between AML and KYC?
A4: KYC (Know Your Customer) is a specific component of AML focused on verifying the identity of customers. AML is broader and encompasses the full range of monitoring, risk assessment, and reporting obligations.
