Anti-money laundering involves the procedures, regulations, and laws designed to protect against money laundering, which is when funds made from illegal activity is disguised by being moved around through different transactions and financial institutions.
In context of global payroll payments, AML is necessary to ensure the company in question isn’t participating in any illegal activity without knowing it. This involves due diligence, a clear KYC process and making sure there are detailed records of transactions.
Examples of procedures within AML
- Customer and vendor background checks
- Monitoring transactions
- Cooperation with the relevant authorities
- Establishing AML policies
- Employee training in AML regulations
What is the AML Process?
Anti-money laundering can be boiled down to the following steps:
- Know your customer (KYC), involves confirming the customer’s identity before allowing for any financial activity. This often includes conducting background checks on the entity or person in question.
- Customer due diligence (CDD) is a more in-depth version of KYC, reserved for customers deemed as high risk. It tends to involve collecting more information about funds’ sources and getting a more in-depth understanding of who is ultimately in control of these assets
- Transaction monitoring means continuously tracking and analyzing customers’ transactions and flagging any suspicious activity that is out of the ordinary.
- Suspicious activity reporting (SAR) involves letting the relevant authorities know if any suspicious transactions are spotted.
Managing AML for a global workforce
Because of the various regulatory frameworks within different countries, managing AML compliance in the context of a global workforce can be especially challenging.
There’s a lot of effort that goes into ensuring that the right procedures and policies are not only in place but are also tailored to match the requirements of each jurisdiction.
Relying on technology to conduct data analysis and automate processes is one way to ensure AML requirements are consistently met.