Money laundering is a huge issue around the world, and unfortunately, it’s continually getting worse.
While many people assume that money laundering is a criminal activity that doesn’t happen all that often in this day and age, the truth is that it costs the world between $800 billion and $2 trillion American dollars per year.
This is especially worrying because money laundering goes beyond the kind of white-collar crime we might see on popular TV shows and movies. It provides huge amounts of resources to terrorism and other kinds of harmful illicit activities all around the world.
There is some good news, however. There’s been massive growth in the anti-money laundering software market over the last few years. In fact, some experts estimate that it will reach a value of over $1.77 billion USD by 2023.
That means that there’s no time like the present to do your research and make sure that your company is investing in the best AML technology out there.
Keep reading to discover what AML software is, what different types of it exist, why you should be investing in it, and a bit of background on anti-money laundering initiatives.
What is AML software?
Broadly speaking, AML software refers to a wide range of programs that help companies protect themselves from money laundering activity.
Not only is having a robust anti-money laundering strategy downright pertinent in this day and age, but it also helps protect your company from significant fines and legal action should you be unknowingly targeted by criminals.
Many businesses, especially those related to the financial services sector, are also subject to anti-money laundering regulations. AML software is just one way to make sure your company remains compliant with whatever standards apply to you.
AML technology has come leaps and bounds in the last few years and it’s continuing to expand at a very quick pace. There’s no time like the present to invest in it and make sure that your company’s AML processes are in tip-top shape.
Different kinds of AML software
Most anti-money laundering technology that’s currently on the market falls into one of the following four categories. Let’s take a deeper dive into what each of these categories is.
1. Transaction monitoring systems
This kind of AML software is fairly self-explanatory. Basically, a transaction monitoring system keeps an eye on a customer’s financial transactions (think transfers, deposits, and withdrawals).
Transaction monitoring systems flag financial transactions when they are deemed as suspicious. They will then be analyzed to determine whether or not the flag was a false alarm. If they’re still deemed as suspicious, they’ll be reported to relevant law enforcement.
Some common red flags include:
- Regular immediate withdrawals after receiving large sums of money
- Transactions with high-risk countries
- Transactions with unregistered geographic locations
- Conversions to virtual assets
- Inconsistent or suspicious transfers
Transaction monitoring systems are obligatory for companies that are subjected to AML regulations.
2. Currency transaction reporting (CTR) systems
Currency transaction reporting systems are specific to the United States. Basically, American banks need to fill out CTR forms every time one of their customers wants to make a transaction of over $10,000 USD.
There are some exceptions to the $10,000 rule. Namely, banks, government agencies, and public bodies are exempt from currency transaction reporting. In addition, CTRs are sometimes done for transactions that are less than $10,000 if the bank is suspicious that their customer is purposely avoiding the $10,000 limit.
CTR systems are regarded as very effective ways to prevent money laundering.
3. Customer identity management systems
Customer identity management or CIM systems related to Know Your Customer (KYC) processes.
KYC processes basically oblige banks to verify their customers’ identities both when they start doing business with them and throughout their business relationship. This is the institution’s responsibility. If they cannot verify their customer is who they claim to be, they can pause or terminate their business relationship.
CIM systems are just one tool in banks’ toolboxes that can help them fulfill their KYC obligations. They have a wide range of features that not only manage customer data and identities but also provide for better user experiences. Some examples include:
- Registration
- Consent and preference management
- Single sign-on and/or multi-factor authentication
- Access management
- Data protection and/or data access
4. Compliance management software
Last but not least, compliance management software often does all of the above and more. They’re wide-ranging AML solutions that implement, monitor, and analyze business processes and make sure that a company is compliant with all legal, security, and in-house requirements.
Some examples include Seon, Actico, and ComplyAdvantage.
The benefits of investing in AML technology
There are so many reasons why investing in AML technology is the best decision you can make for your business. Here are three of the most important:
1. Protect your company in an increasingly risky financial world
Technological innovation has resulted in an explosion of anti-money laundering and combating financial terrorism software. Nevertheless, criminals are becoming savvier and savvier and have more resources available to them than ever.
Just to give you an idea, 2-5% of the global GDP is estimated to be laundered each year.
In addition, approximately 90% of laundered money goes undetected.
It’s more important than ever to invest in AML technology and give your company the protection it deserves.
2. Save yourself from legal action and huge fines
You might be thinking: “hey, I don’t have anything to worry about. I’m not a criminal and my company has nothing to do with money laundering!”
Even if that’s the case, it’s important to make measures to shield your company from being used for illicit financial activities without you even being aware of it. In most situations, companies do not knowingly participate in money laundering.
You also have to make sure that your company is compliant with any AML regulations that apply to you.
In the United States, banks are liable for money laundering. That means it’s their responsibility to make sure that no one can use their institution for illicit purposes. If they fail to do so, they face complicated legal action and hefty fines.
In 2019 alone, anti-money laundering noncompliant banks had to pay 6.2 billion USD in fines.
3. Take advantage of the complete AML software solutions on the market nowadays
In the past, some companies may have been reluctant to invest in AML software because it seemed complicated, inaccessible or incomplete. This might have been the case previously, but it certainly isn’t anymore.
Nowadays there’s a wide range of complete AML software solutions on the market and they just keep multiplying. Now’s the time to research which software would align best with your company’s needs and take the plunge.
If you want to kickstart your research, here’s a breakdown of some of the best anti-money laundering software and tools for 2022.
A quick background on anti-money laundering (AML) initiatives
Various anti-money laundering initiatives have been around for a long time, but they really picked up speed and became more coordinated in the late 1980s. Basically, countries around the world started to realize that they all had a common interest in fighting against money laundering.
This culminated in the foundation of the Financial Action Task Force (FATF) in 1989.
The FATF is an intergovernmental organization that’s headquartered in Paris. While its initial mission was to combat money laundering, it has since been expanded to target the financing of weapons of mass destruction, corruption, and terrorist acts. It was founded by the G7 and is supported by nearly all the developed countries in the world.
The International Money Fund is another intergovernmental organization that plays an important role in anti-money laundering initiatives. Over the past 10 years, the IMF has helped shape international anti-money laundering and combating of financial terrorism policies and standards. They also expect their members to live up to those same regulations.
It’s time to invest in AML technology
All in all, it’s a scary technology world out there. Money laundering continues to be a significant problem worldwide, and unfortunately, it doesn’t seem to be going anywhere anytime soon.
On a positive note, you can take action to make sure that your company is as protected as possible against money laundering initiatives and stays compliant with all local regulations that may apply to you.
It’s time to take the next steps, do your research, find the perfect AML software for your company’s needs, and invest away. You’ll be doing wonders to protect yourself and the world around you.