What Happens If I Don’t Perform AML Checks?
One of the main consequences of not performing an AML check is criminal prosecution; this is in more serious cases. In less serious cases, failing to perform AML checks can also lead to financial penalties, warning letters being served and reputational damage. As you can imagine, when your business’ reputation is tarnished, it will be much more difficult to attract new customers and to keep existing ones.
In this article, we will cover:
- What is an AML check?
- The consequences of not performing AML checks
- How your business can comply with AML checks
What is an AML check?
Anti-money laundering (AML) checks form part of a company’s due diligence to ensure that any employees brought on board are not involved in any money laundering activities through any organisation. It is a great way to ensure the safety of your business from any money laundering and financial criminal activity.
AML checks involve screening individuals against any sanctions lists, global watchlists and politically exposed persons (PEP) databases.
Did you know that HMRC has fined hundreds of businesses with a total of £3.2 million between 1 July and 31 December 2022? (HMRC) This leads us to the question of why AML checks are so important.
Why are AML checks important?
AML checks are important because they form part of the standards that businesses must follow in order to meet AML compliance requirements.
They also help businesses mitigate any risk surrounding money laundering activities.
AML regulations also state that a senior employee should be appointed as a Money Laundering Reporting Officer (MLRO) responsible for taking charge of the business’ AML policies and reporting any suspicious activity to the Financial Conduct Authority (FCA).
AML checks are especially important to conduct within any industry involving large amounts of money, such as:
- Financial institutions
- Credit institutions
- Insurance companies
- Payment institutions
- Gambling service providers
This is not an exhaustive list, so make sure that the industry you work in is compliant with AML regulations before assuming that your business does not need to perform these checks.
The consequences of not performing AML checks:
Should your business fail to comply with regulations regarding AML checks, you are likely to face penalties. These include financial penalties, warning letters, sanctioning, and criminal prosecution. Let’s delve a little deeper into these.
Regulatory authorities, such as the FCA mentioned above, hold the legal right to impose financial penalties on businesses that do not hold the appropriate AML checks.
As you can imagine, these financial penalties can be significant and can have a disastrous impact on your business.
One implication that will have a negative effect on a business’s reputation is if a warning letter is issued due to failing to comply with AML regulations. These letters are a formal notification that you are not compliant.
Additionally, if the public finds out that your business is guilty of laundering money, you will find it extremely difficult for customers to trust you and, equally, to gain new customers.
As well as financial and reputational damage, your business may be subject to sanctions. This will result in your business being unable to carry out certain activities, and you may be subject to further restrictions.
In extreme cases, businesses that refuse to comply with AML regulations can be prosecuted. This may result in imprisonment or being fined, but it can also be both depending on the situation.
So we can now see how important it is for businesses to perform their due diligence and to comply with AML regulations. This safeguards your business as well as the public when doing business with you and will strengthen your customers’ trust in you as a business.
How your business can comply with AML checks:
If you are that senior member of staff that has been tasked with taking a lead on AML regulations within your company, you may be uncertain of how to ensure that you are complying with AML regulations.
There are a few ways in which you can do so.
- Implement a vigorous AML compliance program which includes procedures and policies for conducting AML checks and for reporting suspicious activity.
- Ensure that your staff are trained on the importance of AML compliance, especially staff that are involved with onboarding or transactions.
- Use AML software that will enable you to identify any suspicious activity, and that can automate AML checks.
- Keep a watchful eye on any transactions that take place so that if there is any suspicious activity taking place, you will be aware as quickly as possible.
Remember, it is also your duty to make sure that your business is safeguarded against any suspicious activity. For more expert advice from our experienced team on undergoing company credit checks, get in touch with us at Creditserve on 01992 414222.