The story of barging a product is not new, it has been going ever since its the product that has been changing from wine to casino coins to cement to marijuana. One way or another the constant barging of product arrival and banning it from use is pretty common. The most used example is the US Prohibition Act passed in 1918 and its impact on the local bars and casinos that were pouring in and contributing towards the economy. There has been a sentiment attached with AML that it actually discourages foreign investment. The AML compliance has a lot to answer for and perhaps this has to be the first question on its list that needs to be answered.
Anti-Money Laundering Compliance?
Like any good detective we need to pan out the root cause of the problem, for this we need to understand what exactly Anti-Money Laundering compliance is and how it works. In simple terms it is the process of background screening of any individual to make sure that the person is not a security threat or a “risk”. The process involves checking the person’s credentials against watchlists whether global or international watchlists. The process involves careful analysis often backed by Artifical Intelligence so that the results are real-time. The regulators demand businesses to not have clients and or investors who are potential risks. This is not that old as in the US, the banks were made to follow up on The Bank Secrecy Act.
The investors are typically not as welcoming to new regulations as one would like to be. The problem with regulations and verifications the process becomes a bit more tedious. As the process becomes tedious and this becomes the reason for general discourse. Investors like minimal paperwork and efficient workability, they want results in real time. AML compliance however unfortunately renders the route to simple investment anything but simple. With banks now seeking verifications and employing background checks the process has become tedious and time consuming and even though it is for the greater good it does not seem great at all.
The AML compliance and its implication
Like any regulation AML compliance itself has an implication which we need to understand in order to understand the need for having such a tedious process. In itself the AML compliance has a limited range but the implications of this regulation is vast. The first and foremost role of AML is to deter frauds and criminals and make it harder on them to hide their ill-gotten money. AML requires financial institutions to keep a check on their customers’ monetary assets and make sure they are not ill-gotten and are not being used further in an attempt to make them “white”.
Stages of Money Laundering
Money Laundering is often a disease diagnosed to 3rd world countries or developing states, however the real coverup is provided by the developed countries in the form of Virgin Islands and all. The developed countries come into play during the stages of money laundering. The stages of money laundering include:
- Placement Stage
- Layering Stage
- Integration Stage
Instead of getting into these stages one needs to understand that it is a well placed intricate setup that works like a well-oiled cog. AI backed solutions are often hired to perform AML verification to identify and mitigate the risk.
Although with the implication of Anti-Money Laundering the process of foreign funding and investment is now a hassle. However one cannot ignore the fact that it is the need of the hour, with FATF breathing down the necks of non-compliant nations who are facing economic sanctions. The secure way to perform business in this era is via following FATF prescribed practices and adhering to the AML compliance.