In today’s business landscape, both regulated and unregulated businesses have their own set of challenges and risks involved at different stages. In the financial business, the most widespread and costly risks include Combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML). These risks are based on varying determinants like time, company size, industry, and location.
FATF, (Financial Action Task Force) recommends evaluating and identifying the risks of financial crimes. However, it would be shocking to know that there are no universal laws mandated for AML risk assessment among firms.
However, other mandated regulations make it necessary to conduct CFT risk assessment. This primarily includes the BSA (Bank Secrecy Act) which makes it mandatory to follow all the necessary measures to prevent being involved in money laundering and other financial crimes of a serious nature.
Money laundering is the process of making dirty money obtained from criminal sources (such as corruption, bribery, drugs & human trafficking, corporate fraud, or weapon smuggling) appear legal and clean. Financial criminals have come up with new ways to bypass the anti-money laundering compliance and get away with their crimes. However, AML risk management has to be the focal point among every business to prevent financial crimes from happening.
Let’s get into understanding why financial firms should prioritize AML risk assessment including concerns regarding what is AML risk assessment and how can AML risk assessment save firms millions of regulatory fines.
Risk assessment and management in the field of anti-money laundering involves the process of analyzing the likelihood of the damage one can pose to the business. AML risk management is most efficiently done by detecting the variables (those if marked as high) that depict the probability and severity of risk an entity of subject can impose on the business. These variables are known among the community as Key Risk Indicators.
Given the rising financial crimes, anti-money laundering software has been observed to have a huge demand these days. AML software is always a worthwhile investment given it helps firms evaluate customer behaviors, and provides important data that helps firms observe the transaction patterns of customer base.
Among large volumes of alerts, automated risk assessments allow financial firms to distinguish between high-risk and low-risk individuals. The most challenging task for financial institutions is to deploy a risk-based strategy for informed decision-making that aligns with various compliance guidelines across a diversity of countries, regions, and time zones.
Integrating your AML workflows with real-time information offers a proactive approach to identifying risks and managing the shifting status of risks among individuals.
How to Conduct AML Risk Assessment During the Application?
As mandated by FATF, global business organizations must use AML compliance software during risk assessment that:
- Classifies each customer’s risk level in great detail.
- Extract data from authorized sources for real-time risk assessment
Once a high-risk customer has been identified, organizations must ensure to take the required steps of accurate risk scoring to prevent the damage they could do to your business.
What “AML Risk Assessment” Procedure Firms Should Prioritize During Customer Onboarding?
Considering the key risk indicators associated with each person, there ought to be a different level of money laundering risk linked to the person.
Automated alert systems and proactive AML compliance help with proactive AML risk assessment, whenever a customer with the potential for being risky approaches the bsuiness.
AML regulatory experts put enough emphasis that businesses should align the customer base, after careful consideration of AML risk scoring. As manual screening and assessing risk scores can be draining, AML compliance through efficient and simple AML screening software helps with easy and fast matches.
Why Firms Are Recommended to Employ AML Compliance Tools?
The answer to this question is not explicitly stated, however, we can say that firms are recommended to use an AML screening tool for proactive AML risk assessment that drives informed decision-making.
It needs to be stated clearly, that the cost of investing in AML compliance software would always be less than the amount due after heavy fines are imposed due to non-compliance with AML regulations.
AML Watcher is emerging to be the game-changing solution for its user-centric approach and mission to simplify compliance with complex AML regulations. Try searching against PEP or sanction database with an open search feature readily open for searches.
By deploying smart software into regular workflows, businesses can clearly improve their AML risk assessment by backing up their workflow with an authentic database, that is sourced from official directories for real-time detection of financial crimes and money laundering.
