Anti-Money Laundering (AML) policies allow companies to deal with the threat of money launderers effectively by improving the understanding around the topic, as well as creating a protocol of what to do should the worst happen. By explaining what money laundering actually is and informing businesses of ways they can prevent becoming a victim of it, anti-money laundering protocol improves the general business field to reduce the number of cases of successful laundering.
Appointing a money laundering reporting officer is something that businesses have to do to comply with the money laundering regulations. This is an area that anti-money laundering policy focuses on too, looking at the importance of preparation, the process of spotting suspicions, and how to deal with them from there. The 'nominated officer' must be someone within the business and they must be informed of suspicious activities that could link to money laundering or terrorist financing. The officer will then decide whether to report these suspicions to the National Crime Agency.
Due diligence, know your customer checks, and robust record keeping should also be prominent in anti-money laundering policy. The more vigilant your employees are in the day-to-day running of the business, the harder it is for launderers to fly under the radar.
What is Anti-Money Laundering (AML)?
AML refers to the rules and regulations that aim to stop the practice of generating income through laundering money, this could be through market manipulation, tax evasion, and the financing of terrorism. The impact and authority of AML policies are far-reaching and respected, highlighted in one case by the fact that institutions are required to complete frequent due-diligence checks on their customers to make sure they aren't aiding money laundering activities. The responsibility falls on the organisations to follow the expected policies.
The Financial Action Task Force (FATF) gained global recognition for the laws and regulations around AML. By maintaining an ethical economy through a legally credible and stable financial market, a more efficient and profitable environment is created.
The UK's AML regime stepped up in 2018 through the launch of the new watchdog to strengthen the defences against laundering and terrorist financing. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) works with supervisors and law enforcements to move towards improved cooperation and general standards.
Breaking Down the Policy
AML policies are designed for businesses to follow in order to make sure staff are aware of money laundering, helping them to prevent it taking from place in the first place, and knowing what to do should money laundering activity ever be suspected. It is important that businesses have procedures and policies in place to identify and prevent money laundering from ever becoming a serious issue.
There are three main pieces of legislation that businesses need to be aware of to form an effective policy:
- 1. Proceeds of Crime Act 2002 (POCA)
This Act deals with the process of recovering assets that have been gained through crime, otherwise known as the proceeds of crime. Before the Act was passed, confiscation and recovery couldn't occur until after a conviction had taken place, something that was all changed in 2002.
Simply put, the primary aim of POCA is to reduce the number of loop-holes in the financial system and to reduce the number of successful outcomes for criminals by cutting them off from their motivations – money and assets.
The Act improves the legislation around money laundering, laying out much more black and white rules for people to follow. The changes it has brought highlight how effective it has been too, with £746 million of criminal assets being seized between 2010 and 2014, as well as assets worth more than £2.5 billion being frozen, preventing criminals from being able to use them.
- 2. Terrorism Act 2000
This permanent anti-terrorism legislation for the UK combats the global problem of terrorism, and the financing that comes with it, something that often happens through reverse money laundering (which aims to disguise the destination of money rather than its origin).
This Act aims to combat the financing of terrorism and consequently reduce the number of successful terrorist operations because it leaves people more vigilant around where their money is going and what it's being spent on.
- 3. The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
This Act moves the European Union's Fourth Anti-Money Laundering Directive (4 MLD) into national law. It revokes the Money Laundering Regulations as well as the Transfer of Funds Regulations, both from 2007.
These developments place an emphasis on a risk-based approach to money laundering through new internal controls and procedures including customer due diligence, regular record keeping, and a number of obligations on senior management and employers. Organisations must keep up with the changes to ensure that the more efficient policies and procedures are in place to deal with the risks they could face.