What is AML

What is anti-money laundering prevention (AML) and why is it necessary?

In the last few decades, money laundering has become an increasingly common issue. Both financial institutions and governments are constantly looking for new ways to combat money laundering activity, and have put in place several anti-money laundering policies to aid in these efforts.

The term “anti-money laundering” refers in particular to all policies and legal provisions that require financial institutions to proactively monitor their customers in order to prevent money laundering and corruption. These laws also require financial institutions to report any financial crime they find and do everything possible to stop it.

Anti-money laundering laws began to appear around the world shortly after the Financial Action Task Force was established. The FATF was responsible for creating most of the anti-money laundering standards and providing a framework for countries to follow. After implementing this framework, the FATF then systematically began to identify countries that did not have adequate money laundering legislation. This “name and shame” tactic helped motivate countries to change their legislation and properly enforce the guidelines that were already in place. The GAFI currently has 37 member countries.

Given that financial institutions play such a central role in the world of financial crime, it is important that they have adequate training in identifying and dealing with money laundering. Almost every bank employee receives anti-money laundering training, and everyone is required by law to report suspicious activity. In addition, new anti-money laundering software is increasingly being used to expose potential criminal activity that bank employees may not be aware of.

While financial institutions are required to comply with anti-money laundering regulations, it does not necessarily mean that they are okay with them. Lately, many banks have become vocal about their aversion to money laundering and their belief that these policies are both costly and ineffective. Millions of dollars are spent every year in Europe and America alone trying to regulate and stop money laundering. But many are beginning to believe that the anti-money laundering systems currently in place are largely ineffective and that the amount of money we spend on them is not worth their questionable accomplishments.

In addition to the FATF, the United Nations Office on Drugs and Crime is also proactively trying to identify and stop money laundering. This office has an informative website that provides facts and details about money laundering and how to detect and prevent it. The UN Office on Drugs and Crime also offers software that can help prevent financial crime, collect data, and perform analysis.

Finally, the World Bank also provides information about money laundering on its website and offers a wealth of advice to help governments and private companies end the money laundering epidemic.