When it comes to Anti-Money Laundering, the main difficulty comes not in the renowned parameters of the law, but in the subjective grey areas, like the Know Your Customer (nowadays more commonly described as Customer Due Diligence – CDD) processes imposed upon compliance authorities and the ongoing monitoring process.
For example, a schoolteacher would have a very different transaction record than, say, Mark Zuckerberg. These are practical obstacles faced by banks in monitoring clientele. This is truly one of the most difficult aspects AML compliance officers must determine. If you do not know your customer, you cannot fulfil this requirement.
Due diligence and Ongoing monitoring are some of the most important – if not the most important – methods to circumvent criminal exposure for your establishment from clients who try to use it as a channel for illegitimate purposes. As daunting a goal as it is, you must work to gain a distinct and succinct understanding of each customer’s practices. Adopting risk based due diligence requirements and ongoing monitoring procedures by financial institutions has proven tremendously effective in detecting suspicious activity by customers of an institution in an opportune manner.
Today, identification and enhanced verification of customers’ identity, where they come from, what business they bring, knowing from where the funds in a transaction originate and ongoing monitoring of customer’s activities in respect to a pre-defined risk profile is not an option. It is a legal obligation.
While certain companies and entities may have more frequent and direct contact with customers than their counterparts in larger or busier institutions, it is obligatory for all institutions to adopt and follow policies commensurate to their size, location and nature of business.
Undoubtedly, due diligence is a starting point in the process of observing the preventative measures required to monitor money laundering techniques used by suspected parties. It involves questions by a banking officer or principal of a firm which allows the authority in question to establish the principal source of funds which are being used to carry out financial transactions.
The Financial Intelligence Analysis Unit (FIAU), is a government agency established under the Prevention of Money Laundering Act (Cap 373 of the Laws of Malta). It is the unit responsible for the collection, organisation, dispensation, scrutiny, and distribution of information with the intention of combating money laundering and the funding of terrorism.
The FIAU is also responsible for screening compliance with the relevant legislative provisions for combating money laundering and the funding of terrorism .
Ultimately, the AML rules are in place to mitigate the opportunity for loopholes and to warrant reporting of suspicious activity regarding financial transactions.
If you would like to know more about AML and how our team at Kyte Consultants can give you all the necessary guidance, contact us today.