What triggers AML searches?

AML searches protect your business from the biggest risks out there - financial crime, reputational damage and the heavy regulatory fines that come with financial crimes. Naturally, for businesses across the legal, financial, property and accounting sectors, being able to implement AML searches is the first step towards being compliant and safeguarding your business. 

Here, we’ll take a look at providing a clear and accessible overview for businesses on what exactly triggers AML checks for companies, going into detail on the main scenarios that trigger AML searches. 

What is an AML search? 

Let’s first discuss what an AML search actually is. An anti-money laundering (AML) search is a mandatory regulatory procedure that needs to be implemented by businesses to verify the identity of prospective customers. AML checks for individuals in companies assess the risk associated with that company and how likely it is to be involved in financial crimes, such as financing terrorism or money laundering. 

At Creditserve, we provide AML checks for individuals, shareholders or Directors of ltd companies. Our AML searches involve reviewing and analysing various documents and data sources to create a complete risk profile for these individuals. Documentation that is looked at includes sanction lists, PEP registries or any adverse media screenings. 

Essentially, an AML search serves as a defensive shield, ensuring that the business is dealing with legitimate individuals and that the source of any funds or assets involved is legal and verifiable.

Events that trigger AML searches

Now that we have an idea of what an AML search entails, let’s take a look at the different events that would usually trigger an AML search.                      

Client onboarding (the initial CDD check)

The most obvious trigger for AML searches will take place at the point where a relationship needs to be established with a client. AML searches should take place every single time you open up a new account or enter into a long-term contractual agreement. Implementing a full customer due diligence (CDD) check is legally required during this time. 

This way, you’ll be able to verify the identity of the client, assessing their risk profile before you enter into a service with them. Also, AML checks can be triggered for occasional business if the transaction is higher than a specific financial limit and applies even if no formal business relationship has been established. 

AML searches may also automatically move to Enhanced Due Diligence (EDD) in specific high-risk situations, for example:

  • High-risk relationships: Dealing with clients from high-risk or sanctioned jurisdictions.
  • PEPs: When the ultimate beneficial owners (UBOs) or directors are identified as Politically Exposed Persons (PEPs).
  • High-risk industries: Businesses operating in inherently high-risk sectors, such as money service businesses. 

Event-based triggers

It is important to note that AML searches and AML compliance need to be flexible and also reactive in certain circumstances. AML checks can be re-triggered when any key information about an existing client changes, which may alter their risk profile. For example: 

  • Change in ownership or control: if a new entity or person acquires 25% or more of the business, a new AML search will be triggered to identify the new owners. 
  • Change in key information: If a client changes their name, primary business address or the core nature of the business
  • Insufficient documentation: You may realise that any information that has previously been obtained is incorrect or outdated. You may also realise that details don’t align with public records. In this case, you would be required to implement an AML check. 

Ongoing and periodic triggers

The duty to monitor clients means AML searches are continuously triggered throughout the lifecycle of the business relationship. So, here’s what you should do to ensure you’re keeping on top of AML company checks: 

  • Scheduled periodic reviews: The amount of risk associated with your clients will depend on how often you need to schedule reviews. 
  • Deviation from expected activity: AML searches will also be able to flag any unusual business activity, especially if it is inconsistent with the individual’s profile or business type. 
  • Negative news and media: When screening tools or adverse media searches uncover credible allegations of criminal activity, financial misconduct, or regulatory breaches involving the client or its key personnel, this will immediately trigger an AML search.

Transactional triggers

Lastly, you can expect there to be a trigger in an AML search when there has been illegal activity or any transactions that don’t make sense. For example: 

  • Transactions lacking economic sense: when there are complex or unusual transactions that have no obvious economic rationale.
  • Structuring/smurfing: A classic money laundering technique, smurfing includes small deposits or withdrawals of money below the standard reporting thresholds, followed by a large transfer outward. 
  • Suspicion of money laundering: if, at any point, you are suspicious of a client being involved in money laundering or financing terrorism (regardless of the transaction amount or client type), an alert will be triggered internally for a mandatory AML search to be implemented. 

Proactive compliance is your best defence 

AML searches are a continuous process that is triggered by key milestones, such as forming and entering into a new professional relationship, ongoing periodic reviews, any material change to the client’s identity or risk profile, or if there is any sign of suspicious activity. 

When you make sure that your business has a robust and scalable system to manage these checks, you ensure that your operations are safeguarded. At Creditserve, we offer comprehensive AML checks and compliance searches to help you effectively manage these triggers, keeping your business protected.

Make sure to get in touch with one of our team members at Creditserve to find out more about your next steps in implementing AML checks for companies. Our friendly team of experts are here to help you every step of the way. Contact us on 01992 414222.