What firms need to know about AML Directives

What firms need to know about AML Directives

With the rising level of money laundering regulations and fines, firms need to know what their requirements are. Electronic IDentification has released a report examining the AML Directives.

It stated that firms need to fully understand the magnitude of the risks associated with money laundering as the criminal practices associated with it are a considerable offence for society, companies and individuals. This is why AML and KYC compliance is mandatory for all kinds of businesses and organisations.

Anti-money laundering is a term mainly used by financial, legal and compliance sectors to develop standard controls that companies, and organisations must carry out to avoid, identify and report suspicious behaviours of money laundering.

These processes aim to discourage and prevent potential violators from engaging in money laundering. These processes are very useful in online and remote services/products, where illicit payments are easier.

Electronic IDentification outlined the first major AML regulation firms need to know, Anti Money Laundering Directive #5. This was launched in January 2020 and requires a range of organisations to comply with certain standards.

The EU directive expands on the list of subjects appointed to carry out AML compliance controls in their process. It also gives companies the possibility of contracting, selling and remotely onboarding users in an online, safe, optimised and legally binding way.

It added, “Due to the anti money laundering obligations’ timeliness and characteristics, it is the regulatory framework of reference for the rest of worldwide legislation on the prevention of money laundering in any state on any continent. A company, business or institution in Asia or America will comply with the AML regulations of their state and countries taking this regulation as a reference.”

The next regulation Electronic IDentification highlighted was the Sixth AML Directive.  This removes loopholes in domestic legislation of member states by harmonising the definition of the AML compliance meaning across the EU. It also lists cybercrime as a predicate offence.

This AML standard hardens the jurisdiction and penalties of companies that do not comply, evolves corporate responsibility and establishes the points to consider aggression.

The AML Directives affect a company’s know your customer process. The firm needs to verify a client before providing services or products. These checks include finding out if the subject has committed, is committing or intends to commit a money laundering crime by establishing a business relationship with him.

 Similarly, know your business checks and due diligence processes are tied with AML. Firms need to identify a business, organisation or institution and ensure they pass AML checks.

Electronic IDentification said, “AML/KYC Compliance processes present two main challenges: their conception and understanding and their application in the normal activities of the company or institution. That is why committing its implementation and management to specialised experts is the best way to ensure that we comply with all AML policy requirements and take full advantage of its assets and benefits.”

Read the full report here.

Electronic IDentification’s founder and CEO Iván Nabalón recently spoke to FinTech Global about how the company is paving the way for digital identification technology.

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