It brings a nationwide shame when the name of the country’s president, either present or former, appears on the global sanction lists of convicted money laundering criminals. Pandora’s papers revealed many such cases and made headlines in the news channels of many countries.
As money laundering isn’t practiced in only one country, Anti Money Laundering (AML) was introduced and enforced globally for the financial institutes to combat these illicit activities. Money laundering is called a white-collar crime because many high-end government officials and Politically Exposed People (PEP) are involved in it. The fact that even presidents of many countries participate in this, shows how grave the situation of the crime is.
Money Laundering: Cleaning The Dirty Money
The process of money laundering includes cleaning the dirty money and adding it into the normal flow monetary system. People may ponder, why do criminals launder money in the first place? The main reason is the illegal source that the money is earned from like smuggling, human trafficking, and corruption, and the related legislative consequences it brings. Apart from that, money used in money laundering is mostly used in terrorism financing and works in destabilizing the country’s integrity. It destroys the global economy, which is why FATF and IMF are working against it.
Criminals hide the origins of their money in three steps; placement, layering, and integration. Lawbreakers deposit their money in the bank, hide their resources, confuse it with multiple transactions, and finally withdraw the money from the account. Shell companies are the main accomplice in money laundering. Shell companies are fake companies that have their existence at only registry level and have no regulatory party, employees, or even offices. The culprit uses these shell companies for withdrawing transactions from the banks and without AML compliance regulation, banks don’t even know what is going on.
Why Money Laundering Isn’t Caught Easily?
Because people who are involved in it aren’t usually common citizens. There are high-end personalities present behind money laundering. The second reason is how it’s done. Criminals are really good at finding loopholes in the monetary system and using it to their advantage. Just recently, an operation has been carried out in Germany, where 22 people have been arrested with the charges of money laundering and $46 million along with cryptocurrencies has been confiscated by the authorities. This is why a proper AML monitoring system is required to be added by regulatory parties.
AML Control Against Money Laundering
The AML solutions originated with a firm resolution of ending this crime. Financial institutions are forced to follow AML compliance for the purpose of preventing money laundering transactions and encouraging a stable world economy. It puts regulations on these institutes to confirm the complete identity of their customers before facilitating them with services, confirm their income sources and screen them against global AML sanctioned lists and other criminal watchlists. The financial institutes run risk management on their customers to evaluate what level of risk each customer poses, and then maintain a risk profile of every customer for future evaluations.
Artificial Intelligence: Opening New Doors For AML Screening
The modern world is incomplete without AI, and since every field is integrating its technology with artificial intelligence, AML Security can be enhanced with an AI-aided system. The process will go as follows:
- The customer provides his original identity with complete income resources information
- The bank confirms that identity with facial recognition, in which customer’s face can be screened, his features can be mapped, and his livenesses can be detected by the system
- The scanned face will be compared with the official identity document generated and provided by the government
- After validating the customer’s identity, their documents are verified. The information from the documents is extracted using OCR technology and cross-checked against the previously provided personally identifiable information.
- The information of the customer is checked against AML sanction lists, watchlists, and PEPs. If the customer is found in the list, their entry can be discarded and immediately reported to the authorities. If the customer is found risk-free and the background checks also come in a positive nod, they can be given access
Anti Money Laundering (AML) is crucial to be implemented by financial institutions to prevent money laundering activities. The addition of AI in the AML systems is an efficient, adaptable, and practical approach to boost the process of AML verification. The introduction of AML solutions in banking institutes can combat money laundering crimes and other criminal activities linked with it.