Money laundering has always been a problem, especially for financial institutions, but with the inclusion of cryptocurrencies, the need for effective AML compliance solutions is now greater than ever.
Every year, between 800 billion and 2 trillion in US dollars is “laundered”. That’s between 2 and 5 percent of the global GDP, according to the UN.
In this article, we’ll explain what AML compliance software solutions are and what they do, along with the best solutions and some tips on what to look for when choosing one for your business.
What are AML Compliance Solutions?
The United States was the first country to make money laundering illegal with the Money Laundering Control Act of 1986. This act amended the Federal criminal code and for the first time made money laundering illegal.
The UN’s Vienna Convention 1988 Article 3.1 described money laundering as:
“The conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.”
Not that money laundering wasn’t around before then.
However, in recent years, money laundering is on the rise, placing extra pressure on businesses, especially financial services, to adopt AML compliance solutions.
These (AML compliance solutions) are platforms that help organizations ensure their compliance with applicable laws and regulations and meet their anti-money laundering obligations.
The person who often manages all of this is called the AML compliance officer.
What do AML Compliance Solutions do?
AML compliance solutions have several tasks, including:
Monitoring Transactions
AML compliance software solutions are capable of monitoring financial transactions in real-time or periodically, which helps in detecting suspicious behavior and other red flags.
Risk Assessment
Another important functionality of AML compliance solutions is their ability to assess the potential risk associated with customers, transactions, and geographic regions, which helps organizations minimize them.
Integration with Watchlists
Next, AML solutions should integrate with government or internal watchlists or blacklists of known individuals and groups involved in money laundering and similar activities.
Customer Due Diligence
Customer due diligence or CDD is vital for verifying the identity of the customer and risk profiling and AML solutions often offer valuable insight into these.
Regulatory Reporting
Relevant authorities require regular reports and documentation on suspicious financial activities from your business. With the help of AML solutions, you can more easily and quickly generate these reports and ensure your compliance.
Compliance Monitoring and Analytics
Finally, these solutions can also offer crucial insight into the business’ compliance efforts through monitoring and analytics tools and help you stay up-to-date on the latest regulatory changes, helping your AML efforts.
Best AML Compliance Solutions
The AML software market is worth $1.77 billion in 2023. A couple of years ago (2017), it was worth $860 million. That means that it has doubled in worth in just 5 years!
Naturally, there are a lot of AML solutions out there, but we’ll give you the 5 best ones currently:
1. Captain Compliance
Captain Compliance is an outsourced compliance service that provides businesses in different markets and industries with AML, financial, regulatory, corporate, GRC, and other compliance solutions.
In addition, our company also offers compliance auditing, monitoring, and training & education services.
2. SEON
SEON is a fraud-detection tool that can also help with AML compliance by monitoring criminal and fugitive watchlists, blacklists, and sanction lists. The API can be used on its own or integrated with other tools.
3. Dow Jones Risk & Compliance
The Dow Jones is one of the oldest stock market indices in the world. The Dow Jones Risk & Compliance solution can provide important insight into high-risk industries and money laundering, including financial crime compliance, 3rd-party risk management, and more.
4. iComply
iComply offers AML and KYC solutions for businesses in fintech, crypto, and other markets, including over 150 million data sources, including KYC, KYB, identity verification, and proofing, and more.
5. Token of Trust
Token of Trust is a US-based AML, KYC, and background screening company that also covers markets like the EU and provides comprehensive age and identity verification, PEP and sanction cross-checks, and more in industries like finance, healthcare, retail, and travel.
What to Look for in an AML Compliance Solution?
As you can see, AML compliance solutions can differ quite a bit. This is why it’s important to carefully qualify them to find the one that can best answer the specific needs of your business.
Here are the four most important things to look for in them:
1. Regulatory Compliance
One of the most important questions when vetting AML solutions is, “how well does the solution comply with relevant laws and regulations?” If it cannot align with the applicable regulations in your industry and geographic region, it won’t be very useful to you.
2. Data Integration
Another factor to look for is if the AML solution integrates with internal and external data sources, especially transaction systems and watchlists of known or high-risk individuals and groups.
3. Risk Assessment & Monitoring
AML compliance solutions provide comprehensive insight into customer data and transactions and identify potential red flags and suspicious activities that can imply financial crimes and money laundering activities.
4. Flexibility and Scalability
Finally, as the needs of your business for compliance can change over time, the solution you are using must follow suit and allow your business to grow and adapt to these new requirements, including new laws and regulations in your industry and market.
FAQs
What is AML Solutions?
AML solutions are software services or platforms that can help businesses detect, prevent, and report activities related to financial crimes, including money laundering and terrorist financing.
What are the 5 Elements of the AML Compliance Program?
The 5 elements or five “pillars” of an AML compliance program are
- Implementation of internal controls
- Designation of an AML compliance officer
- Periodic employee compliance training
- Independent AML compliance program testing
- Customer due diligence (CDD)
What is the AML Solution for Banks?
AML solutions for banks include tools or software that help banks and other financial institutions to comply with AML regulations and identify and prevent financial crimes.
What Software Does AML Use?
AML or anti-money laundering uses various softwares, such as:
- Watchlist screening software
- Risk assessment software
- KYC software
- Compliance monitoring and reporting
- Transaction Monitoring Systems (TMS)
Of course, these will vary depending on the needs of the business using them.
Closing
90% of money laundering crimes are never detected. However, the consequences of money laundering can be catastrophic for your company.
This makes AML compliance solutions a necessity, especially if you’re in a high-risk industry like finance.
Contact Captain Compliance, and our team of compliance superheroes will help your business detect, prevent, and report money laundering activities. Get in touch today!