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Anti-Money Laundering

What is money laundering? 

Money laundering is a criminal process in which illegally-gained revenue is made to appear legitimate through a number of transactions within the legitimate financial system. In this manner, so-called “dirty” money is made to appear “clean,” by obfuscating its origin.

Money laundering is often conflated with terrorism financing, since the methods used to channel funds into terrorist networks often make use of money laundering to do it.

How does money laundering work? 

First, money is secretly introduced into the legitimate financial system. There are many methods for this, such as use of cash-intensive businesses to make the funds look like they are part of a legitimate cash flow, buying real estate, smuggling the cash in bulk to another jurisdiction and then introducing it into the financial system there as legitimate funds, use of money services businesses such as check cashers or stored value cards, or running the money through various shell companies and trusts to obscure its origin and owner.

Then, the money is often transferred between multiple owners to further confuse its sense of origin and ownership. 

Finally, once the money is considered to be “clean,” it is transferred into the legitimate financial system as ordinary currency that no longer has an obvious connection to criminal activity. Once illegal proceeds no longer have a clear trail connecting them to their point of origin, the money is considered to have been fully laundered.

How do you report money laundering? 

While anti money laundering regulations vary, financial institutions are generally expected to file a Suspicious Activity Report (SAR) to government authorities, typically within 30 days of detecting any signs of potential money laundering activity, such as cash transactions over $10,000.

In the United States, financial institutions such as banks must use the Bank Secrecy Act BSA E-Filing System to submit an SAR. Futures commission merchants (FCMs) and introducing brokers (IBs) must use Form 101, Suspicious Activity Report by the Securities and Futures Industries (SAR-SF). Commodity pool operators (CPOs) and commodity trading advisors (CTAs) are not yet required to file SARs, but are encouraged to do so voluntarily, also using the SAR-SF.

The United Kingdom suggests SARs be reported through the SAR Online system, which provides instant acknowledgement of the report, as well as a reference number. SARs in the UK are overseen by the National Crime Agency.

What is AML?

Anti money laundering, or AML, are those rules, policies and procedures established by government regulators and enforcement agencies, to prevent the activities and financial transactions that are meant to hide the true origin of money (especially that which is generated illegally). Government agencies that oversee AML law typically also issue AML guidelines to aid with their compliance.

In the United States, the first AML regulations were codified by the Bank Secrecy Act of 1970, and have since been updated by other pieces of legislation, including:

  • the Money Laundering Control Act (1984)
  • the Anti-Drug Abuse Act of 1988
  • the Annunzio-Wylie Anti Money Laundering Act (1992),
  • the Money Laundering Suppression Act (1994),
  • the Money Laundering and Financial Crimes Strategy Act (1998),
  • the USA PATRIOT Act (2001)
  • the Intelligence Reform & Terrorism Prevention Act of 2004

The United Kingdom’s AML regime are codified by:

What is AML compliance? 

AML compliance programs are the formal set of internal policies, procedures, and controls that 1) oversee all internal monitoring for signs of money laundering activities, 2) report said activities, and 3) independently test those first two capabilities to ensure they are working properly. Many industries within the financial services sector are required to have a formal AML program, which must be in writing, and must include a formally designated compliance officer, ongoing employee training, and an independent audit function to test the program. 

In the United States, the Financial Industry Regulatory Authority—a self-regulatory organization, has also set forth minimum standards for AML compliance programs under FINRA Rule 3310

The USA PATRIOT Act amended the Bank Secrecy Act to require various financial institutions to formally adopt AML compliance programs. Similar laws mandate AML compliance programs for mutual funds; credit card companies; money service businesses; broker-dealers; insurance companies; and dealers in precious metals, stones, or jewels.

White Paper

KYC Fundamentals Guide

Sponsored by IdentityMind | July 10, 2017

An essential guide to getting to know your customer (KYC).

White Paper

Digital Identity Evaluation Guide

Sponsored by IdentityMind | July 10, 2017

This guide provides a framework that will help you think through your strategy with a focus on the functionality and technology that can help you achieve the right acquisition, risk and compliance balance.

White Paper

Best Practices for Mitigating Fraud in the Onboarding Process

Sponsored by IdentityMind | July 10, 2017

IdentityMind created this Best Practice report for online lending executives looking for ways to integrate strong identity verification into the loan origination and customer onboarding process.

White Paper

Balancing Risk Management & The Mobile User Experience

Sponsored by IdentityMind | July 10, 2017

This guide provides ideas on how to combat fraud while maintaining an inviting user experience.

News Article

U.K. FCA issues strong new financial crime reporting rules

Neil Hodge | September 13, 2016

Taking issue with numerous reports that London is an ideal environment for money laundering and other financial crimes, the city is fighting back, writes Neil Hodge.

The Filing Cabinet Blog

FinCEN wants to extend AML programs to all banks

Joe Mont | August 25, 2016

Banks lacking a Federal functional regulator have been hit with proposed rules by the Treasury Department’s Financial Crimes Enforcement Network that would require them to implement anti-money laundering programs. Joe Mont has more.

The Filing Cabinet Blog

Poll: Panama Papers will cause financial crime enforcement to spike

Jaclyn Jaeger | August 25, 2016

As the Panama Papers saga continues to unfold, global enforcement of financial crimes are expected to spike over the next year, according to a recent poll conducted by Deloitte Advisory. Jaclyn Jaeger reports.


e-Book: The Challenges of Fighting Money Laundering

Sponsored by Pitney Bowes | June 30, 2016

In this e-Book, produced by Compliance Week in cooperation with Pitney Bowes, we explore this evolving AML regulatory and enforcement landscape, as well as how to reduce AML risk. We also take a look at how Pitney Bowes Entity Resolution for Financial Crimes and Compliance software is aiding in the fight against money laundering to improve bank compliance.

Enforcement Action Blog

Mega Bank fined $180 million for AML violations

Jaclyn Jaeger | August 23, 2016

The New York Department of Financial Services has ordered Mega International Commercial Bank of Taiwan to pay a $180 million penalty and install an independent monitor for violating New York’s anti-money laundering laws. Jaclyn Jaeger reports.

The Big Picture Blog

It’s time for a risk-based approach to KYC

Neil Jeans | August 16, 2016

One size definitely does not fit all when it comes to managing know-your-customer and anti-money laundering exposures, but a risk-based approach to these challenges still poses a complex solution that requires time, energy, and dedication, writes Neil Jeans.

The Man From FCPA Blog

AML due diligence for non-financial institutions

Tom Fox | August 8, 2016

What does the 1MDB scandal portend for non-financial companies and anti-money laundering compliance? Plenty, especially if they haven't reviewed their AML policies and procedures in the last 12 months. Tom Fox reports.

Global Glimpses Blog

Basel Index finds slippage in AML efforts

Joe Mont | August 3, 2016

The Basel Committee on Banking Supervision, an international consortium that develops banking standards, has issued its “Basel AML Index,” an annual ranking of country risk regarding money laundering and terrorism financing. The overall conclusion this year, says Joe Mont: A majority of countries fall short in the effective implementation and enforcement of AML laws.

The Man From FCPA Blog

The (anti) corruption London bus tour

Tom Fox | November 8, 2017

A London bus tour that features the proceeds of corruption, exploring properties alleged to have been purchased with monies purloined from the country of Nigeria by the country’s former oil minister, the disgraced and now arrested, Diezani Alison-Madueke.

GRC Announcements Blog

Delta Capita launches Big Data as a Service Platform for data analytics and machine learning

GRC Announcements | September 20, 2017

Delta Capita, an independent consulting firm  dedicated to the financial services industry, has launched its new Big Data-as-a-Service Platform, Delta>Data, offering clients a set of flexible solutions to both industry-wide and client-specific issues.

Coffin on Compliance Blog

Shall we play a game?

Bill Coffin | September 18, 2017

Have you ever wanted to play a money laundering simulator on your iPhone? Now you can, with Kleptocrat, a cool new game that is actually a cagey anti-money laundering awareness effort.

News Article

LexisNexis Risk Solutions’ Chrisol Correia on AML, the convergence of risk intelligence

Joe Mont | September 19, 2017

The leader of LexisNexis Risk Solutions' global anti-money laundering solutions strategy discusses trends in AML, risk management technology, and the evolution of FinTech compliance.

News Article

‘Lone wolf’ terror attacks pose a challenge for financial detectives

Joe Mont | September 12, 2017

Following 9/11, laws and compliance rules were leveraged to “follow the money” and disrupt terror plots. But can those efforts intercept “lone wolf” attacks?

The Filing Cabinet Blog

Basel AML index: many countries still fall—sometimes severely—short

Joe Mont | August 18, 2017

The annual Basel Anti-Money Laundering Index, a ranking of 146 countries regarding money laundering risks, is out. The findings show that plenty of work on the issue remains to be done.

News Article

OPBAS and U.K. anti-money laundering

Neil Hodge | August 15, 2017

As the United Kingdom struggles to police money laundering more efficiently, will its newly created Office for Professional Body Anti-Money Laundering Supervision be the answer?

The Man From FCPA Blog

FCPA, CEOs, and risk assessments

Tom Fox | August 15, 2017

Ian Narev, chief executive officer of the Commonwealth Bank of Australia, may soon join the ranks of those CEOs who depart once a corruption scandal goes public.

News Article

AML woes continue to plague firms, amid new compliance demands

Joe Mont | August 14, 2017

Money laundering still strikes institutions large and small. While regulations are both added and reconsidered, what firms really need is data integrity.