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Zoe Allen

Finance professional with extensive experience in Anti-Money Laundering (AML)

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November 1, 2023

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Blog / Why AML Screening is Saving, not a Cost

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Why AML Screening is Saving, not a Cost

In an era of an interconnected global economy, money laundering is a considerable threat to organizations. According to a recent analysis of UNDOC (United Nations Office on Drugs and Crime), $800 billion to $2 trillion are laundered every year, which is equivalent to 2 to 5% of the world’s Gross Domestic Product (GDP), emphasizing on development of innovative strategies to combat financial crime.

This blog will talk about this growing concern of authorities to implement anti-money laundering policies, by focusing on the increasing need for AML Screening.

How to define AML Screening?

The process of monitoring people, checking their background, and transaction patterns to detect evidence or risk of money laundering is termed AML Screening.

However, anti-money laundering is the set of precautions that are compulsory for companies and financial institutions to follow, if they wish to avoid their involvement in illegal incoming and outgoing of money.

Why are possible use cases of AML Screening?

While the main objective of AML Screening is to prevent corruption and money laundering, however, to be precise, the uses of AML Screening are as follows:

  • Risk Assessment – help with assessing existing and possible dangers that your business might be exposed to, in order to prevent unintentional involvement in illicit financial activities.
  • Avoid Violating Sanctions- because credible sanction lists enable quick insight into people or organizations that have been sanctioned, thus preventing potential legal implications.
  • Protection from Regulatory Penalties – is made possible by adhering to AML compliance which lifts off the burden of heavy fines and legal penalties of non-compliance.
  • Protect Reputation – by timely detecting and avoiding dealing with organizations that are involved in money laundering or other illegal activities
  • Reduce Operational Risks –  by minimizing the risk of legal penalties, fines, and reputational damage linked with corruption and money laundering.

Organizations that have violated AML regimes have suffered hazardous drawbacks, some of which are discussed below.

Consequence of Violating – AML Fines and Penalties in 2023

 

Money Laundering Statistics of 2023

Money laundering is a complex yet intricate issue affecting the global economy and stability. In actuality, the estimated yearly amount of money laundering is $800 billion, or close to 5% of the world GDP. Money launderers frequently have access to goods and services at prices below market value, which makes it challenging for honest enterprises to compete.

Bank of Queensland Fined $50 Million

Bank of Queensland, also known as BOQ, is facing a $50 million penalty. Why? Because they didn’t follow the rules for money laundering and other financial standards. Regulators say they made mistakes, and fixing them could cost BOQ even more money. BOQ has made a deal with two financial regulators, AUSTRAC and APRA. They have to keep an extra $50 million until they address the problems identified by the regulators. This ensures that they take the right steps to avoid future issues.

Crown Resorts Faces $450 Million Fine for AML Breaches

Crown Resorts, an Australian casino company, is in trouble for past mistakes. AUSTRAC, has imposed a $450 million fine on them. This significant penalty is due to Crown Resorts’ failure to prevent money laundering and terrorist financing at their Melbourne and Perth casinos. Both AUSTRAC and Crown Resorts have agreed to the fine, but it still needs approval from the Federal Court. If approved, it will be one of the largest fines ever given to an Australian company. The CEO of Crown Resorts, Ciaran Carruthers, expresses their commitment to rectifying their past mistakes.

Mr. Green Company, Faces £19.2 Million Fine

William Hill along with its prominent sister company known as  Mr. Green, has been hit with a massive £19.2 million fine. Why? Because they didn’t do enough to ensure their customers were playing responsibly and to prevent money laundering.  Some major highlights include spending £23,000 in just 20 minutes, while many customers were facilitated to spend large sums of money in two days. Additionally, people were depositing significant sums of money, losing it. Despite the warnings from the Gambling Commission to not  take advantage of vulnerable individuals during that time, this incident is a prominent highlight of the pandemic era.

Guaranty Trust Bank was fined £7.6 Million

For inadequate systems and controls to prevent money laundering, the bank was not only fined but also faced repercussions for failing to properly assess the risk of their customers or investigate the source of their funds. This was not their first instance of negligence, resulting in an increased penalty. They did not dispute the fine imposed by the Financial Conduct Authority (FCA) and agreed to pay, earning them a 30% discount on the penalty.

ADM Investor Services Fined £6.47m for Money Laundering Controls

ADM Investor Services International Limited, a company that deals with commodities, has been hit with a hefty fine of £6.47 million by the UK’s Financial Conduct Authority (FCA). This is because their systems and controls to prevent money laundering were not up to scratch. The FCA pointed out that ADM Investor Services operates globally and serves clients who could pose a high risk for money laundering. Some of these clients are politically exposed persons, meaning they have a higher chance of being involved in shady financial activities.

In Touch Games Faces £6.1m Fine for Failures

In Touch Games, an online gaming company with 11 platforms in the UK, is in trouble with the UK Gambling Commission (UKGC). They’ve been fined £6.1 million for not doing a good job when it comes to making sure their customers are playing responsibly and keeping an eye out for money laundering. One serious issue was that they didn’t talk to a customer for seven weeks, even though the customer was showing unusual playing patterns. They also believed a customer who said they made £6,000 a month without checking if it was true, even when there were warning signs.

All these penalties could have been avoided resulting in saving of millions of dollars in monetary and reputational losses. So, it is key to understand the benefits of integrating good AML, and how it results in cost reduction.

Benefits of AML in Cost Reduction Strategies

Anti-Money Laundering (AML) helps companies save money by reducing the time and effort spent by back office compliance officers. These officers often had to check lots of false alarms i.e. false positives and miss real issues like false negatives. With AML, these costs are going down. Companies need fewer back office employees, which is a big money-saver. Anti-Money Laundering (AML) offers several key benefits in cost reduction strategies:

Efficiency: AML technology automates and simplifies compliance procedures, which saves compliance officers time and effort. Costs are reduced as a result of the greater efficiency.

Reduced False Alarms: By better recognizing real suspicious activity, AML systems can reduce false positives, allowing compliance teams to concentrate on real risks rather than spending time on insignificant problems.

Accuracy Enhanced: AML technologies improve the accuracy of identifying  false negatives, averting potential financial crimes and regulatory fines. The financial burden of compliance violations is lessened by this precision.

Less Need for Back Office Staff: As AML technology advances, businesses need fewer back-office compliance officers to manually examine and analyze transactions, which lowers labor expenses.

Reduced Compliance Costs: AML assists businesses in avoiding regulatory fines and penalties related to non-compliance, thereby saving them a significant amount of money.

Image illustrating 5 Benefits of AML in Cost Reduction Strategies

Certainly! Anti-Money Laundering (AML) is not just a compliance requirement; it is a smart financial strategy. It enhances efficiency, accuracy, and compliance cost reduction by automating processes, minimizing false alarms, and reducing the need for extensive back-office staff. AML also shields businesses from regulatory fines, ensuring long-term financial security. It’s not just a compliance requirement rather it is a strategic investment in financial efficiency and protection.

In order to save the cost and time of a lot of MLROs AML Watcher ensures your business is protected from time and cost constraints with enhanced accuracy.

Are you interested in saving your time and cost too? Ready to protect your business and bolster your financial strategy?

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