How to improve AML checks with compliance checklists

Anti-money laundering (AML) compliance is extremely crucial to the safeguarding of financial services. AML compliance, however, is often changing,  which means that businesses should always look to keep on top of AML compliance checks and regulations. In this article, we will go through the importance of an  AML compliance checklist for you, so that you don’t suffer any severe consequences like financial fines or severe reputational damage.  

Read on as we dive into the details of a robust AML compliance checklist and how this will ensure consistency, minimise errors and simplify complex regulatory requirements. 

Why is AML compliance important? 

We need to remember why we should comply with AML requirements in the first place, as they act as the first line of defence against any global financial crime. In return, this helps protect not only certain organisations, but the entire economy, too.  

 

When there are rigorous screening processes in place, major criminals, such as those financing terrorism, drug traffickers or corrupt officials, are unable to hide or move illicit funds. So, financial organisations need to ensure that effective AML compliance is implemented. This way, you ensure your organisation’s reputation is safeguarded and the financial integrity of yoursystem is protected, too.  

The importance of an AML compliance checklist

Now that we’ve covered the importance of AML compliance and how this helps protect the financial ecosystem, let’s take a look at why you need an AML compliance checklist:

1. Ensuring consistency and standardisation in AML compliance checks

An AML compliance checklist ensures that your AML compliance checks are consistent and that they meet all of the necessary standards. Having a checklist to work from ensures that you don’t miss anything during the implementation of your AML checks. 

 

With a comprehensive AML compliance checklist, risks like this are eliminated, and your organisation will have access to a standardised roadmap that can be used during every AML compliance check. By having a checklist to work from, you can follow through with the same process each time. 

 

The benefit of this is that every individual implementing an AML compliance check can work towards the same standards, regardless of their experience. 

 

2. Reducing human error in AML compliance checks

Naturally, there is also less risk of human error with an AML compliance checklist. Human error can take place easily during the rush of daily operations and small omissions can easily render an entire AML compliance check incomplete or non-compliant. 

 

It acts as a powerful safety net that reminds individuals to stop and make sure that each step is taken in the process and that nothing is left undone or missed out. 

 

The benefit here is that your organisation will have a reputation for implementing reliable and accurate AML compliance checks. Having an AML compliance checklist in place will reduce the likelihood of accidental oversight. 

3. Simplifying complex regulatory requirements

Another reason for your company to create an easy-to-follow AML compliance checklist is to simplify any complex legal language. This way, you’re also ensuring that errors are minimised. Now, your staff will be able to interpret the information quickly and will have a better understanding of what is required of them during AML compliance checks. 

 

Detailed regulation, such as those related to sanction screening, transaction monitoring thresholds or Enhanced Due Diligence (EDD), can now be broken down into manageable chunks where staff can take actionable steps in the right direction. 

Creating your own AML compliance checklist

Here’s our recommended AML compliance checklist: 

 

Governance: 

Item	Process
AML Policy	Get an AML compliance policy written up and approved by senior management. Ensure that this policy is regularly updated in line with updated regulations.
Appoint a money laundering reporting officer (MLRO)	Appoint a qualified MLRO or a Compliance Officer who has the authority and the resources to support.
Staff training programme	Ensure AML training is conducted for all relevant employees upon hiring and regularly thereafter. Ensure that your training records are maintained.
Reporting to senior management	Make sure that your team regularly reports to senior management on the status of AML controls, high-risk cases, and any suspicious activity.
Record keeping	Ensure that procedures are in place to retain all CDD documents, transaction records and SARs for the regulatory period - this is usually 5+ years.

Risk assessment: 

 

Item	Process
Risk assessment	Create a comprehensive risk assessment and regularly review it, ensuring that vulnerabilities based on customers, products/services or geography are identified.
Risk-based approach	Ensure that an RBA is adopted into all processes, making sure that due diligence efforts are proportional to the risk identified.
New product/service reviewed	Ensure that each new product or service is assessed for AML risks before launch.

Customer due diligence

Item	Process
Identify and verify the customer	Ensure that you obtain the identification of all new customers using reliable and independent sources.
Identify beneficial owners (UBO)	In relation to corporate/legal entities, ensure the Ultimate Beneficial Owners (UBOs) who own or control a defined percentage of the entry.
Sanctions and watchlist screening	Customers are screened against relevant sanctions lists and any other watchlists before onboarding them.
PEP checks	The customer is screened for Politically Exposed Person (PEP) status.
Purpose of the relationship	Ensure that you understand the and document the purpose of the business relationship.
Enhanced Due Diligence (EDD)	EDD procedures are automatically put into place for high-risk customers, for example, PEPs or in high-jurisdiction.
Ongoing due diligence	Regularly review and refresh CDD information, especially for high-risk clients, and update the risk accordingly.

Transaction monitoring and reporting

Item	Process
Monitoring system	Ensure that you have procedures in place that are able to monitor customer transactions against their suspected activity, risk profile, and any established red flags.
Red flag identification	Train your staff so that they are able to identify any red flags that lead to money laundering
Internal suspicion reporting	Create a clear and confidential process for internal employees to be able to report red flags to the compliance manager
External SAR filing	There is a process for filing and investigation of Suspicious Activity Reports (SARs) to the relevant regulatory body.
Tipping-off policy	All staff have been trained on the prohibition against informing a third party that an SAR has been filed against them.

 

Making AML compliance checklists a core part of your process

By having an AML compliance checklist as part of your AML compliance check process, your organisation is gaining three benefits, includins operational consistency, a reduction in human error and simplified regulations to follow. 

 

You don't have to worry about installing and using complicated software, either. All you need to focus on is following the checklist so that you can take the necessary steps to ensure that your organisation is compliant. So, now your AML compliance checks will become reliable and trustworthy. 

So, now you have the key knowledge and skills to implement a robust AML compliance checklist in your organisation, which means you’re well on your way to being thoroughly compliant during AML checks. For more information on AML checks, be sure to get in touch with our friendly team  of professionals at Creditserve today!