Anti-Money Laundering (AML) practices include laws, regulations, and procedures applicable to the detection, prevention and reporting of activities that involve money laundering. AML practices that are implemented by financial institutions and other regulated entities are designed to prevent illicit funds from entering the financial system and becoming commingled with and indistinguishable from legitimate funds. This protects financial institutions from being a party to criminal activity and ensures compliance with federal regulations.
Use case / examples for Anti-Money Laundering (AML)
Transaction Monitoring: Monitoring customer transactions on a continuous, real-time basis — especially with AI-powered tools and machine learning — helps banks and financial institutions to spot unusual transaction patterns that may indicate an account is being used for money laundering. When a potential anomaly is detected, transaction monitoring software triggers an alert to the appropriate teams for further investigation.
Customer Due Diligence (CDD): Verifying a customer's identity and performing customer background checks is a required step to comply with Anti-Money Laundering (AML) laws. This due diligence prevents accounts from being opened for the purpose of money laundering and thus stems the illegal activity before it starts.
Suspicious Activity Reporting (SAR): Reporting suspicious activity through the appropriate channels is a cornerstone of the responsibility that financial institutions take for preventing money laundering. These reports are key in identifying both small- and large-scale money laundering activities.
Risk Management: Setting clear policies for the evaluation of customer profiles, customer locations, and transaction types helps institutions to proactively manage the level of risk inherent in any account or transaction, and reduce the overall risk of money laundering.
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