Nowadays, the topic of “money laundering” is often heard in the news. The fact is that every year the problem of trafficking in illegal funds is becoming increasingly widespread. Fraudsters and criminal networks resort to cunning methods to transfer and hide their finances. Given this situation, expert financial technology Roman Tereshchenko emphasizes the need to implement measures to counter this process, known as anti-money laundering (AML) measures. Why are they needed and on what principles are they based?
Money laundering in the world: real numbers, risks to the economy and counteraction through AML
Money laundering is a large-scale problem affecting more than 120 countries around the world, with varying degrees of economic development. Roman Tereshchenko brings the linestatistical data, which indicates the scale of the problem of illegal cash flow. The analyst estimates that global losses from this type of fraud range from $800 billion to more than $1 trillion annually. Just imagine that, according to the UK National Crime Agency, £90 billion (or $117 billion) of money is laundered through this country every year. In Canada, according to experts, up to 1 billion Canadian dollars are laundered annually through real estate transactions. In the United States, an average of 1,500 money laundering cases are filed annually.
Such eloquent facts speak for themselves. Moreover, money laundering methods are becoming increasingly sophisticated, which creates serious obstacles for competent authorities in identifying suspicious activity and bringing criminals to justice. Therefore, the expert believes that governments must invest resources in AML initiatives if they are to successfully counter this growing threat.
What is AML in essence?
– Anti-money laundering (AML) is a set of measures that include laws, regulations, and procedures aimed at preventing and detecting the illegal conversion of criminal proceeds into legal assets,– explains Roman Tereshchenko. – The essence of AML is to disrupt the financial structures of criminal organizations, which reduces their motivation to engage in illegal activities such as drug trafficking, terrorist financing, corruption, and fraud.
The expert is convinced that financial institutions have a responsibility to implement effective AML programs to identify and mitigate the risks associated with money laundering and terrorist financing.
Key principles of AML: review from expert Roman Tereshchenko
Important AML principles include customer due diligence (CDD), Know Your Customer (KYC), transaction monitoring, suspicious activity reporting, and recordkeeping requirements. Roman Tereshchenko proposes to dwell on this in more detail.
Based on KYC, financial institutions must verify the identity of customers and analyze their risk profile. These processes are carried out by collecting information about the client (name, address, date of birth, and documents confirming his identity).
The expert reports that KYC requirements differ in different jurisdictions. Even so, financial institutions must take reasonable steps to ensure that their customers are who they say they are and are not engaging in illegal activities. An example of such measures is the cryptocurrency industry, which tries to comply with KYC rules due to the anonymity of digital currencies and other crypto assets.
“In turn, customer due diligence (CDD) is a process that financial institutions use to identify and assess the risks associated with customer transactions,” says Roman Tereshchenko. – Unlike KYC, which focuses on identifying the customer when creating an account, CDD is an ongoing process that is applied throughout the entire interaction with the customer.
The expert draws attention to the fact that when using CDD technologies, financial institutions must be aware of their client’s business – its ownership structure, sources of funds, and typical transactions. This information is used to assess the client’s risk and identify suspicious transactions on his part.
If there is a suspicion that a customer’s transactions may be related to fraud, they should file a Suspicious Activity Report (SAR) with the appropriate authorities.
Thus, Roman Tereshchenko is convinced that AML is critically important as it prevents the financial sector from being used to launder illegal funds. He believes that the implementation of anti-money laundering (AML) measures helps improve the security of financial transactions around the world. One more emphasis from the expert: “From a business point of view, compliance with AML rules helps protect the company from reputational damage and financial losses, which is very important for the further development of its activities.”
Interesting Related Article: “The Art World: A Hotspot for Money Laundering?“