The global AML landscape is diverse and financial institutions must keep pace with rules and regulations in order to remain compliant.
But regulations are constantly evolving and businesses must also be prepared to move swiftly, adopt new standards, and protect themselves from scrutiny.
Below is a list of all the topics we will cover in this article. Go ahead and click on any of these links, and you’ll be taken to that specific section.
The Current AML Landscape
Today, money laundering has permeated almost every regulated market. The scale of the pandemic is difficult to assess, but the United Nations Office on Drugs and Crime (UNODC) estimates that the amount of money laundered globally is “between 2–5% of global GDP, or $800billion – $2trillion per year.”
Anti-Money Laundering regulations are in place to mitigate the risk of money laundering and terrorism financing. Financial institutions are required to monitor their clients to prevent money laundering and report any financial crime they detect to relevant regulators; where a business is functioning determines the local and international regulations they need to comply with in order to continue operating
AML laws were brought to a global forefront after the creation of the Financial Action Task Force – the global money laundering and terrorist financing watchdog. Most regulated markets and countries in the world have strict AML laws and regulations with severe penalties.
There are a number of major AML regulatory bodies around the world and where a business is functioning determines the local and international regulations they need to comply with in order to continue operating. Businesses operating within the EU must conform with the updated 6th anti-money laundering directive which came into effect in December 2020. Download our guide for all you need to know on 6AMLD here.
The Future of AML
One thing you can count on in the world of compliance and regulation is how unpredictable it is. We have explored how criminals are using cryptocurrency and games to launder money previously on our blog due to their developing regulations.
Anti-money laundering regulations are changing and covering new markets all the time. Businesses must be prepared to move swiftly, adopt new standards, and protect their business from regulatory scrutiny.
For example, the EU recognised the need for stricter regulations on the crypto industry with the fifth anti-money laundering directive which came into effect at the start of 2020. It stated that cryptocurrency currency exchange providers and custodian wallet providers operating in the EU will have to:
- Perform customer due diligence, also known as know-your-customer (KYC).
- Financial investigators can be mandated to obtain addresses and identities of cryptocurrency owners, removing anonymity of exchange users.
- Cryptocurrency exchanges and wallet providers will need to be registered with relevant financial regulators in their home country. Such as the Financial Conduct Authority in the UK, or the Securities and Exchange Commission in the US.
The EU acknowledges that regulating virtual currency exchange providers and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, since users can transact without going through such providers. But to combat the risks related to anonymity, 5AMLD states that national financial intelligence units should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency.
Of course, businesses must also consider how to remain compliant now that the UK has left the EU. The UK has long been regarded as one of the most regulated countries in the world when it comes to financial services and the City of London will be keen to keep its reputation as beyond reproach. Regulations are likely to remain in line with the sixth anti-money laundering directive which came into effect in December 2020 for businesses in the EU – those outside of the EU have until 3rd June 2021 to ensure their processes are compliant.
Cybercrime was mentioned in 6AMLD for the first time, so this is huge for businesses to take on board and a key focus to reduce the number of online crimes that occur. The fact that cybercrime is at the forefront of regulators’ minds, enables businesses to pinpoint and tackle any potential money laundering activity efficiently and effectively.
The UK government has also stipulated that electronic identity verification should be the preferred method, something which The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 made clear, clarifying that it is the most effective way for businesses to ensure compliance with all the latest legislation, enabling businesses to move away from manual, document-based checks when onboarding clients.
Emerging markets and modern forms of verification are becoming more subject to regulation, so it’s important businesses heed the advice and ensure their processes are up to scratch.
How We Can Help
Wherever your business is operating you need to comply with local and international regulations, but keeping on top of jurisdiction while retaining efficient business practice is no mean feat. This is where Hello Soda can help.
Our global suite of AML solutions satisfy and comply with all of the above regulatory bodies while helping onboard your customers faster and more efficiently with more accurate results. Using our single universal API, Sodium you can onboard up to 68% more customers compared with traditional identity verification methods. One simple integration; a flexible 360° solution which is scalable and secure.
Book a demo today and see for yourself how powerful our suite of solutions are.