Anti-Money Laundering Regulations - A Guide for Beginners

Mark Halstead Compliance

Anti-money laundering (AML) regulations refer to rules and laws enforced to stop illegally obtained monies being processed in such a way as to appear legitimate.  First written in law in the US in the 1970s, AML regulations around the world are continually revised to account for new behaviours, technologies, and modes of criminal operation.

It is the responsibility of companies, organisations and institutions to ensure money is not being laundered through their operation, and non-compliance or ineffective practices can result is hefty fines, the closure of the business, and even considerable jail time for those involved. Read on to find out more about AML regulations, who they apply to, and what they will look like in 2022.

What are anti-money laundering regulations?

In simple terms, AML regulations make it a legal requirement for businesses and financial institutions to put in place checks and processes which ensure money cannot be laundered through their operation.

There are a number of ways for criminals to ‘wash’ their illegal funds, including through fake invoices, spending in cash, offshore bank accounts, and many more imaginative financial enterprises.

AML regulations also cover other fraudulent activities including tax evasion, selling illegal goods, political corruption, drug trafficking and a range of other illegal financial actions.

Business and institutions which handle large sums of money are responsible for implementing AML processes which may be audited annually in some cases but usually every two to three years.

Who do anti-money laundering regulations apply to?

AML regulations apply to businesses and some individuals in the financial sector, and/or who handle large sums of money.

Examples of businesses who must register for money laundering supervision include:

  • Estate and letting agents
  • Accountants
  • Solicitors
  • Finance/credit companies
  • Tax specialists
  • High value transaction dealers handling cash to the value of over 10,000EUR

What is AML compliance?

AML compliance is the actions taken to mitigate business risk against being used to facilitate money laundering in any guise.

Every relevant organisation should be registered with the appropriate AML authority, and implement processes and systems to ensure full, traceable compliance in every area of business where money is handled or reported. 

The requirements of AML compliance and the costs attached are ever-increasing, and this area of business has become so complex that often companies require outside help to navigate their way through it.

The basics of an AML compliance plan are:

  • Register with the relevant authority
  • Designate a compliance officer
  • Design and create a written AML compliance plan of rules and practices
  • Provide training to relevant staff, regularly if possible
  • Create a procedure to report suspicious activity

Many businesses seeking to simplify their processes without reducing the effectiveness of their AML compliance systems use AML software to carry out stringent checks more quickly and with equal or improved precision. Business data software designed with AML compliance in mind can save a company considerable time and budget, as well as provide a cloud-based workflow and audit trail meaning regulators can see what they need instantly, and your company is always up to date and compliant.

Who is responsible for AML compliance?

There are a number of AML authorities in the UK each with a different area of specialism. The three main authorities are:

  • National Crime Agency (NCA) - specialising in organised crime
  • HM Revenue & Customs (HMRC) - helps ensure businesses comply with AML regulations
  • Financial Conduct Authority (FCA) - main regulator for AML in the UK

From the side of the business or financial institution, a designated compliance officer or officers take responsibility for AML compliance in the business, ensuring all regulations are adhered to and kept up to date. For larger organisations this often requires a team of full-time staff and a large budget to ensure compliance at all times.

AML regulations and challenges expected in 2022

In 2022 and beyond it is widely expected that AML regulations will continue to expand and become more complex.

The UK government plans to make a raft of amendments to AML regulations, which will result in more expense for businesses both un the UK and further afield. These costs need to be considered and steps taken to ensure your business has an efficient and effective AML compliance plan heading in to 2022.

In this beginner’s guide we’ve given an overview of what AML regulations are, who is responsible for them are, and what you can do to stay compliant.

Download our complete guide to AML regulations to discover more about AML regulations, facts and figures about businesses who did not comply, more tips on how to ensure compliance, and reduce AML compliance costs in your business.

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Mark Halstead Partner

Mark's experience is big data analytics, financial services and building businesses provides Red Flag Alert with strategic direction.