Four Methods for Combating Money Laundering

10 May 2022

It has become increasingly difficult to distinguish between severe potential threats and the numerous false positives that appear in searches. Using technology, such as artificial intelligence (AI), to conduct continuous searches can relieve some of the pressure on Anti-money laundering (AML) officials by screening out certain false positives while increasing searches. Treating customers fairly (TCF), hosts a quarterly round table with state and local law enforcement as well as regional banks to review trends and new ways people are working to get around the system. Banks receive intelligence about new frauds from law enforcement, but banks are often seeing these schemes before law enforcement. Additionally, banks and law enforcement can keep each other up to date, confirm any concerns, discover probable networks, and strengthen the public-private cooperation by holding frequent meetings, and forming a united front against money launderers. Using data analytics to find patterns-data analytics is a very crucial aspect of combating money laundering. Usually, this is seen as multi-factored patterns where fraud occurs under this geographic region, with this specific product kind, from clients with this certain possible occupation. Once suspicious patterns have been found, AML officials can construct client models that incorporate risk tiering and daily bad news notifications. They look for any links between negative news and any account features, such as geography or other aspects. Other ways could also include better-correlating accounts with potential alarms or money laundering tendencies, TCF uses due diligence tools like Thomson Reuters CLEAR. Individuals with several PINs or ties to tax fraud are just a handful of the many red flags that may prompt further investigation.

Many banks have introduced recent developments by acquiring rivals, which has resulted in a mixture of old computer systems. Spreadsheets are now used by some divisions, whereas ledgers are used by others. This difference in systems can prevent antifraud efforts by prohibiting different branches from interacting efficiently with one another. In furtherance of this, officials from the AML must know what to look for. A trainer, a developer, and a facilitator are the three people in charge of new employee orientation and training at TCF. These instructors also provide remedial training for officials, bringing them up to speed and regularly putting the bank through its paces.


How Can Financial Institutions Work?

The Financial Action Task Force (FATF), is a multilateral organization headquartered in Paris, France. It was established in 1989 to combat cash counterfeiting and terrorist financing. The FATF guidelines provide a comprehensive and consistent framework of actions that governments should apply to combat money laundering, terrorism financing, and the proliferation of weapons of mass destruction. As a result, the FATF proposals establish an international standard that countries must adhere to by taking actions that are tailored to their circumstances. The intergovernmental group creates international standards to reduce illegal activities and the harm they do to society. As a policy-making body, the FATF seeks to foster the political will necessary to achieve national legislative and regulatory reforms in these areas. Additionally, financial institutions must produce clear and straightforward steering documents that are consistent throughout the organization, as well as thorough procedures that translate AML/CFT policies into an acceptable and workable practice, assigning duties to stakeholders. Financial institutions have also established a clear framework for updating policies and procedures in response to new regulatory requirements. All concerned employees now have easy access to documents, and big changes are conveyed quickly. Moreover, Financial institutions are also required to keep detailed records, documents, data, and statistics for all transactions, as well as a variety of record types and documents associated with their ML/FT risk assessment and mitigation measures, including all records obtained through CDD measures, account files and business correspondence, and results of any analysis undertaken. 


What is an AML/CFT Training Programme?

Financial institutions must build a rigorous and thorough risk-based training program to manage the ML/FT risks they may face. They need to ensure that the staff receives specialized training operating from their legal advisors in high-risk areas of the market (for instance, Trade-Based Money Laundering Trade Finance employees are given training);

  • and also establish that training requirements are constantly changing identified, as well as a training regimen that includes the required budget has been authorized. 
  • All employees (including Senior Management and the Board) are subjected to AML/CFT training every year at the very least.


Compliance Officer (CO)

FI’s must designate a (CO) with the necessary skills and expertise to carry out the statutory duties and obligations under this position.

flow chart demonstrating steps to combat money laundry

Customer Due Diligence 

Financial institutions must perform appropriate customer due diligence (CDD) at the time of onboarding and continue to do so throughout the business relationship which can help;

  • Adequate controls in place to ensure that transactions are not completed before CDD verification is completed and ensure;
  • Ongoing due diligence is performed for customers/business relationships to ensure that the transactions conducted are consistent with the information maintained by the FI and the type of activity they are engaged in.


Sanctions Screening Systems & Processes 

This is an important key element.  Concerning Targeted Financial Sanctions (TFS) and other UN Security Council decisions, financial institutions shall fulfil their commitments to follow the orders of the applicable Competent Authorities and Supervisory Authorities. They must also control their risk of being subjected to the hazards of unilateral international financial penalties and restrictive measures imposed by other countries.


Suspicious Activity Reporting 

  • For high-value cash transactions, there are reporting templates with content that requires reasoning and accompanying evidence and;
  • Reporting entities that have registered in the go AML system to ensure that Suspicious Transaction Report (STRs) are reported accurately and on time.