The Role of AML Compliance Systems in Countering ML/TF

Anti-Money Laundering (AML) compliance is widely automated these days. Many Regulated Entities across the globe are switching to AML software solutions to streamline their AML compliance obligations. This infographic brings out the multi-faceted role of AML Compliance Systems, which help mitigate Money Laundering (ML) and Terrorism Financing (TF) risks due to the inbuilt ability of AML Compliance Systems to serve multiple purposes that go beyond mere automation of AML compliance processes.

The multi-faceted role of AML Compliance Systems in countering ML/TF is elaborated as follows:

• Centralised Legal Library: AML Compliance System serves as a centralised legal library by providing one-click access to relevant AML laws and regulations applicable to Regulated Entities using the AML software. The AML software can provide easy access to relevant circulars, byelaws, sector-specific guidelines applicable, serving as ready referencing tool for the Regulated Entity.
• Centralised Document Repository: AML software consumes customer data fed into it for delivering output such as screening results, Customer Risk Assessment (CRA) results, business risk assessment results and so on. In simple terms, AML compliance software carries out its defined process, such as Customer Due Diligence (CDD), Know Your Customer (KYC), Sanctions Screening, Transaction Monitoring, etc., based on data sets and rules programmed. This facilitates AML compliance software to act as a centralised document repository where the data utilised, and results derived can be easily exported as and when required by the Regulated Entity.
• Automated Updates: Another feature that makes AML Compliance System serve multiple purposes is its ability to generate and customise updates or notifications whenever there is a change in customer profile or situation necessitating the Regulated Entity’s personnel to look into the case and take necessary action. For instance, the automation feature of generating alerts helps Regulated Entity to become aware if any of its existing customer became recently sanctioned due to update in sanctions list.
• Online Training Module: AML compliance solutions that are well developed act as online training modules as the AML compliance processes contained within help newly recruited personnel of a Regulated Entity to understand AML compliance process through the workflow implemented by the AML software. AML compliance tools also provide designated training modules that act as ‘user manual’ for the personnel that use it helping clear AML compliance concepts in the context of the Regulated Entity’s AML compliance obligations.
• Customer Identification: AML Compliance Systems help with customer identification as its framework provides for CDD and KYC modules which help with customer identification obligations prescribed through AML laws across the world.
• Know Your Customer (KYC): KYC is the backbone of AML compliance as it helps identify and mitigate risks posed to a business through its customers. AML Compliance Systems with KYC functionality facilitate the fulfilling KYC obligations according to a Regulated Entity’s applicable jurisdiction.
• Screening: Sanctions Screening helps Regulated Entities to ensure compliance with Targeted Financial Sanctions (TFS) requirements, as well as curb TF activities by identifying individuals and entities included in the sanctions lists. AML Compliance Systems usually have integrated within them the Application Programming Interface (APIs) of the sanctions issuing authorities which enable them to stay updated with inclusions and removals in the sanctions list and generate notifications or alerts whenever customer credentials are found to be similar to sanctioned individuals or entities, making AML Compliance Systems useful asset to a Regulated Entity.
• Risk Assessment: AML Compliance Systems help with assessing business risk, also known as Enterprise-Wide Risk Assessment (EWRA) as well as customer risk. EWRA and CRA modules of AML Compliance System help it with identifying, assessing, and deploying risks posed to a Regulated Entity from factors such as customers, geographies they deal with, mode of transactions they prefer, technologies they use, products and services they deal with and which of their products or services come under AML regulatory purview and so on.
• Case Management: AML Compliance Systems act as a unified platform where the dashboard generally facilitates accessing all the AML compliance processes such as screening, CDD, KYC, Transaction Monitoring, Ongoing Monitoring, EWRA, CRA, Regulatory Reporting, AML Audits and so on. Case management helps with carrying out all AML obligations from one place, making AML Compliance System play a pivotal role in achieving compliance goals.
• Transaction Monitoring: AML Compliance Systems help Regulated Entities to monitor or keep track of customer transactions, looking for anomalies indicating suspicious customer behaviour necessitating taking of Enhanced Due Diligence measures or regulatory reporting.
• Audit Trail: With the centralised document repository feature of the AML Compliance Systems, Regulated Entities can export all the AML compliance exercises conducted on the AML Compliance System into another system or into printed hard copies for facilitating the AML audit process that relies upon the AML audit trail generated for conducting independent AML audits.
• Regulatory Reporting: AML Compliance Systems are instrumental in fulfilling regulatory reporting requirements as the systems facilitate the online flagging of suspicious activities or transactions and escalating the same to the AML compliance officer or Money Laundering Reporting Officer (MLRO) for taking decision for further action.

Conclusion
AML Compliance Systems offer end to end AML solutions that help Regulated Entities meet their AML obligations through a variety of functions served by AML Compliance Systems such as CDD, KYC, Screening, AML audits, regulatory reporting, acting as data repository, serving as legal library, providing training modules etc.