Developing a robust anti-money laundering (AML) program is paramount for any company in the financial sector. These programs ensure compliance with current regulations set by the Bank Secrecy Act. The goal is to prevent money laundering schemes, the financing of terrorism, and other illicit activities.

AML programs can be complex, but here are a few essential components every program should have.

Customer Screening

Screening is a crucial part of the AML process. It's the quickest way to avoid working with potential clients that could have nefarious goals in mind. There are many types of screening available.

At the very least, organizations should vet clients against sanction lists and government watchlists. A politically exposed persons check, or PEP check could also help organizations understand the risks of working with a client. For more information on PEP check or politically exposed person screening, visit the website.

Risk Assessment

There is no one-size-fits-all approach to AML compliance. While red flags could make organizations wary of working with a client, that doesn't mean financial crimes will occur. A good AML program will have detailed risk assessment measures to determine what issues could occur. It helps guide monitoring processes and classifies clients based on their unique financial needs.

Evaluating risks involves complex scoring models that take everything from a PEP check to their geographic location. With that information, an organization can consider the stakes in its own products and services to create a risk profile for every client.

Internal Controls

A big part of AML programs is having a set of policies and procedures that comply with AML regulations. Organizations must teach employers about AML compliance, showing them how to spot suspicious account activity.

There should be an easy way to report questionable activity, initiate reviews, and perform due diligence with every client. Organizations must have a well-planned course of action for every scenario with strategically assigned roles and responsibilities.

Independent Audits

Finally, a solid AML program will include regular third-party audits. Audits let you gain a fresh perspective on your current AML efforts, helping you see weak points that could use improvement. Most experts recommend performing an audit every 12 to 18 months to help organizations remain responsive while evolving to ever-changing threats.

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