What Is Money Laundering and How Does It Work? 

Money Laundering

Financial criminals generate profits from their acts and often disguise these proceeds through money laundering, enabling criminal parties to use their funds without jeopardizing their activities. According to the United Nations Office on Drugs and Crime, between EUR 715 billion and 1.87 trillion is laundered every year (2-5% of the global GDP). The changing global risk landscape, including the advent of innovative fintech start-ups, virtual payments and cryptocurrencies, requires a fresh approach and stricter controls than ever before. 

What Is Trade Compliance?

Trade Compliance

Trade compliance is the processes and procedures by which goods enter and exit a country in adherence to relevant laws, regulations and other requirements of the countries from which the goods are being imported or exported. This incorporates many aspects of international trading, including training, classification, trade risk, import duties and taxes, certifications, and country-specific import licensing and approvals. 

What is Enhanced Due Diligence (EDD)?

In today’s complex regulatory environments, businesses have to be careful about who they have business dealings with. Enhanced Due Diligence is an advanced KYC due diligence process that provides additional risk investigation into high-risk customers or large transactions. Knowing your customers’ past and present business dealings and their links to high-risk countries or entities can significantly lower a business’ risk of regulatory fines and other penalties. 

30 AML-Compliance Terms to Know

AML

Anti-Money Laundering refers to the laws, regulations and procedures aimed at uncovering the efforts unscrupulous parties may make to disguise illicit funds as legitimate income. Here are just a few of the terms you should know when it comes to AML Compliance: 

The Problem of Name Matching in Sanctions Screening 

Name Matching

Name Matching is the “real hard nut to crack” in AML / Sanctions compliance. While Fuzzy Algorithms can help with some of the real world challenges like typos, incomplete strings etc. some issues like transliteration issues, nicknames, spelling differences can’t be mitigated with any fuzzy algorithm. The results are either an overload of false positives or, even worse, false negatives.

sanctions.io’s new name matching technology solves these challenges by blending machine learning with a set of traditional name matching approaches.

Learn more about different approaches and technologies for name matching problems in this article.

What are FATF Blacklists and Greylists?

FATF blacklist

The Financial Action Task Force (FATF) was established in July 1989 to combat money laundering and terrorist financing. Today, more than 200 countries follow their recommendations and AML standards.

As part of their mandate to curb financial crime, the FATF blacklists countries that have been identified as being inadequate in their counter-financing of terrorist regimes or anti-money-laundering practices. This list is sometimes called the FATF AML deficient list. Before countries are blacklisted, they are placed on a greylist to first address identified strategic shortcomings as well as the agreed time frames for remediation.

This article will explore the differences between blacklists and greylists in greater detail, as well as how to remain compliant.

Sanctions For Cybercrime 

Cyber Sanctions

Cyber sanctions are a fairly new addition to the global regulatory environment, but they are increasingly important. These sanctions work in a similar fashion to traditional sanctions. They are designed to restrict transactions, trade and commercial connections with individuals and organizations that are suspected of carrying out cyber-enabled assaults. 

How Economic Sanctions Work 

Economic Sanctions

Following the Russian invasion of Ukraine, Economic Sanctions have been in the spotlight for the last couple of weeks.
In this article we discuss what Economic Sanctions are and how they exactly work.

How to File a SAR/STR

While more resources and attention is spent combating money laundering and terrorist funding than ever before, the first and best line of defense often lies with financial institutions and concerned citizens who report suspicious activities to their local Financial Intelligence Unit. To encourage diligent reporting and monitoring, there are severe penalties for both individuals and institutions who fail to file a suspicious transaction report (STR) or suspicious activity report (SAR) despite having reasonable grounds to believe that a transaction is related to criminal activity.

Primary And Secondary Sanctions Explained

Primary and Secondary Sanctions

Sanctions are important political tools that governments use to achieve their foreign policy goals or as a means to punish and discourage violations of international law.
It is important to understand that sanctions are not always only applied to persons that fall within the jurisdiction of the sanctioning government but also to persons in foreign jurisdictions who trade with targets who have been sanctioned. 

Human Rights and Sanctions – Everything You Need to Know

Sanctions and Human Rights

In 2020, the Council of the European Union adopted a Decision and Regulation implementing a new sanctions regime that would enable the EU Council to take restrictive measures against natural persons and entities involved in serious human rights violations, including travel bans and asset freezes.  In 2021, the Council imposed restrictive measures on fifteen individuals […]

The UK’s Economic Crime Act 2022

Sanctions enforcement

The UK government brought forward its Economic Crime (Transparency and Enforcement) Act 2022 following the unprovoked invasion of Ukraine by Russia. The Act will include important changes to OFSI’s powers so that the organization can respond swiftly and robustly to breaches of financial sanctions. The measures will commence on 15 June 2022. 

The Difference between Sanctions and Embargoes

Sanctions and Embargoes

The terms sanction and embargo are often used interchangeably, but there are several important distinctions between the two. Both sanctions and embargoes are political tools designed to influence the behavior of a targeted country’s government, individuals, or businesses in order to affect change. But whereas sanctions target specific transactions (e.g. prohibiting the sale of arms), an embargo is a complete prohibition of all trade activities between countries. 

Russia Sanctions and Sanctions Evasion with Cryptocurrencies

Russia Sanctions Crypto Evasion

Sanctions imposed on Russia over its unprovoked attack on Ukraine have left the Office of Foreign Assets Control concerned that Russia may turn to crypto mining and transactions to circumvent western sanctions. Crypto mining (which is used to validate new digital currency transactions) consumes a lot of energy.

The concern is that Russia may utilize its natural resources to conduct crypto mining to evade sanctions, a tactic deployed by both North Korea and Iran in the past. Crypto mining can bypass sanctions screening as it avoids the so-called fiat-to-crypto on- and off-ramps at virtual exchanges, making it hard to detect. 

Anti-Money Laundering Guide For the Art Market

The art world has always had a dark side, especially when it comes to money laundering. In many ways, works of art are the ideal vehicle for money laundering. Prices are subjective and manipulable. It’s not uncommon for anonymous buyers to fork out millions for a piece of art on an apparent whim. Art can easily disappear from public view for decades. Art bought at auction can remain in a free port or storage for years, and sold anonymously for huge sums of money, with minimal paperwork. 

What Is Trade Compliance and Why Does It Matter?

Global Trade Compliance

Trade compliance is one of the most complex aspects of corporate compliance.
Companies that export/import across borders must comply with the regulatory framework of multiple governing bodies, often several within a single country, which can change rapidly and without warning and regulations across trading nations may differ dramatically.

Sanctions Evasion Using Crypto 

sanctions evasion

After several nations implemented strict sanctions against Russia, following the Ukrainian invasion, there were several concerns raised about the possibility that Russia would use cryptocurrencies to evade sanctions. Visa, Mastercard and PayPal have suspended services in Russia; they have been barred from SWIFT and the Russian Central Bank’s assets were seized. As the country is […]

The US Anti-Money Laundering Act

US Anti-Money Laundering Act

The Anti-Money Laundering Act of 2020 (AMLA) forms part of the National Defense Authorization Act (NDAA) and has greatly widened the scope of enforcement and reporting requirements. Some have called it the biggest overhaul of the bank’s secrecy and AML regime since the Patriot Act. Under AMLA, provisions include: The establishment of a beneficial ownership […]

The Effects of the Latest Russian Sanctions

While President Putin boldly declared that sanctions against Russia have failed, the full impact of Western sanctions has been keenly felt. Severe sanctions cut off Russia’s access to foreign reserves, limited their ability to import key dual-use technology and froze the assets of major banks. The Kremlin responded by hiking interest rates to 20% and forcing Russian businesses to convert their profits to rubles in order to recover. However, this may not suffice in the long run. 

AML Terms Explained: Reverse Money Laundering

Terrorist Financing

In the most simple terms, reverse money laundering is the opposite of typical money laundering schemes where criminals spread illegal gains to lower the odds of being found. With reverse money laundering, legal funds are removed from circulation and used to fund criminal activity, terrorism and tax evasion or bribery. Legitimate funds are used, which […]

AML Terms Explained: Smurfing vs Structuring

Smurfing vs Structuring

The terms smurfing and structuring both refer to money laundering techniques deployed by financial criminals. The two terms are often used interchangeably, but there are subtle differences. Smurfing is highly illegal, goes even further than structuring, and can be even harder to detect. Financial institutions have a duty to familiarize themselves with the inner workings of a smurf to protect their reputation and their clientele. 

Anti-Money Laundering Guide for Digital Banks 

AML Guide Digital Banks

The convenience and speed of digital banks continue to lure new customers to their businesses, with statisticians predicting that the total number of digital banking users will soon reach new records. Unfortunately, these inherently beneficial qualities make them lucrative and easy targets for money launderers. Leaner teams and the speed of onboarding may cut costs and accelerate service delivery, but it also leaves a gap for financial criminals. Customers are often onboarded in hours, not days, as with traditional banks. 

However, as fintech startups and digital banks become fully regulated financial institutions, governments insist on tough compliance standards, and regulators demand that accurate customer data be collected and built into risk assessment processes.

AML and KYC Regulations in the US and Europe 

AML regulation

Money laundering conceals crimes that range from tax evasion to drug trafficking and even terrorist funding. According to a panel formed by the United Nations, money laundering schemes amount to flows of as much as $1.6 trillion (or 2.7% of the global GDP) every year. Anti-money laundering (often referred to as AML) is the nexus […]

Money Laundering in Vehicle Sales

AML Vehicle Sales

Criminals will often use expensive assets, including cars, boats and even luxury planes, to disguise illegal funds and later convert them into cash. Automotive companies should take note: anyone involved in vehicle sales (including car dealerships, banks and law firms) who fails to identify a money-laundering scheme may risk considerable penalties (and even criminal charges) under stringent AML regulations. Understanding the red flags of money laundering and how dealerships, middlemen and service providers may be implicated is the first step to avoiding becoming an unwilling participant in financial crime. 

Anti-Money Laundering Guide for the UK

AML UK

Anti-Money Laundering broadly refers to the activities that financial institutions perform to ensure they remain compliant with legal requirements to actively monitor and report suspicious activities during the course of their normal business operations. In the last two years, many changes to the UK’s anti-money laundering regulations have come into force, including the incorporation of international standards as set by the Financial Action Task Force as the transposition of the EU’s 5th Money Laundering Directive. Companies have to remain aware of legislative changes in order to avoid hefty fines and penalties from regulators. 

AML Regulations and the Metaverse

AML Regulations

The term Metaverse entered the world’s collective consciousness in October 2021 when Facebook rebranded as Meta and founder Mark Zuckerberg introduced a virtual replica and announced that human beings might soon migrate to a virtual world governed entirely by its users. According to Gartner, by 2025, 25% of people will spend at least an hour in the metaverse a day, working and transacting in a virtual space. Investors, legislators and employees are still coming to terms with what the metaverse is, what it may mean, and how current regulations will govern the vast number of transactions occurring in virtual environments every day. 

The New Anti-Corruption Sanctions Regulations of the UK

Sanctions Regulations

Since Brexit, the UK has focused on implementing sanctions regimes that both complement and go even further beyond the EU’s current sanctions regimes. On the 26 of April 2021, the UK Foreign Secretary announced a new global anti-corruption sanctions regime that aims to combat international corruption. The Global Anti-Corruption Sanctions Regulations 2021 is underpinned by the Sanctions and Anti-Money Laundering Act of 2018 (SAMLA) and has introduced asset freezes and travel bans for individuals and organizations who are believed to be involved or have been involved in serious corruption or crimes. 

The Anti-Money Laundering Guide for Leasing

Leasing companies are not financial or banking institutions but provide resources like factoring and financing in the same way these institutions do. Leasing falls within the scope of financial services and is subject to AML regulations and specific regulatory practices, as are any businesses participating in the leasing system.

Money Laundering and Environmental Crime 

environmental crime

Green crime, including forestry crime, poaching, illegal mining and waste trafficking, is of growing concern around the world. Proceeds from these activities fuel further serious crime, including tax fraud and drug trafficking. The FATF (Financial Action Task Force) has provided recommendations that both governments and private businesses can follow to disrupt this activity; however, very […]

What is KYC and why does it matter?

KYC

Know Your Customer (or Know Your Client) identification is one of the first and most important components of the ongoing fight against financial crime and money laundering. Global anti-money laundering (AML) and countering financing of terrorism (CFT) directives have placed tremendous pressure on financial institutions to follow stringent verification and onboarding processes in their organizations.  […]

The EU’s new AML/CFT Framework

A series of recent money laundering scandals, including the Russian Laundromat and Danske Bank, have sparked international concern and calls for greater due diligence.  The European Commission has been conducting risk assessments to identify and address the threat of cross-border money laundering and terrorist funding, and as a result, the European Union has adopted robust […]

An Overview of Crypto Regulations Around the World 

Crypto Regulations around the world

US Securities and Exchange Commission Chair Gary Gensler has famously described cryptocurrencies as the “Wild West” of the financial world due to the lack of laws and regulatory frameworks governing the digital currency space. In most instances, cryptocurrencies are subject to anti-money laundering policies and standards, and in 2021 crypto crime accounted for more than […]

Ultimate Beneficial Ownership (UBO) in AML

anonymous owner

The legislation and regulations that pertain to Ultimate Beneficial Ownership (UBO) verification are highly complex and challenging to navigate. The EU’s Fourth Anti-Money Laundering Directive states that holding more than 25% of the shares, interest or being a beneficiary of at least 25% of the legal entity’s capital gains gives individuals UBO status. This status […]

The 10 Key Warning Signs For Money Laundering (and How to Mitigate the Risk)

Banks, money transfer and fintech companies, credit and insurance organizations and gambling operators must ensure AML compliance and take every step to avoid money laundering. Playing a part in facilitating money laundering, however unintentionally, is a risk for every financial institution and professional. Most anti-money laundering compliance programs adopt a risk-based approach. They make a […]

6 Steps for Completing an AML Risk Assessment

Anti-money laundering risk assessments are crucial for preventing financial crimes and remaining compliant with regulations. This comprehensive guide will review the basics of an AML risk assessment by answering the following questions: What is an AML risk assessment? Why should you complete one? What steps are involved? What is an AML Risk Assessment? Money laundering […]

Root Causes Of OFAC Sanctions Violations

The role of the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) is to implement and manage US economic and trade sanctions against specific foreign governments and regimes, terrorists, drug traffickers, and dubious organizations. OFAC aims to encourage and check that people or organizations who trade in US goods and services […]

AML Risk Trends Shaping the Industry in 2022

Money laundering has been around for thousands of years. The reasons for laundering money are largely unchanged – people want to disguise the true source of their income. However, the methods used to launder money change with business trends and technology. Technology has exploded in recent decades, and with it opportunities to launder money. In […]

AML & Sanctions Compliance for NFT Marketplaces

NFT

The global market for non-fungible tokens hit $42bn this year as digital images fast became popular investment assets, rivalling the size of the fine art world. Considering that NFT sales were at $100m in 2020, it seems as though we are on the precipice of a looming digital gold rush in 2022.  That being said, […]

Fan Tokens – Here’s What You Need To Know About The Newest Crypto Asset Facing Regulation

Crypto Regulation

After more than a decade, cryptocurrencies have risen to prominence in global finance, promising more security, value, and convenience through the blockchain. In response, governments stepped in to provide consumers with further protections. We’ve previously discussed AML frameworks, which help increase the level of transparency in transactions and lower the risk that crypto will be used […]

Risk Indicators for Trade-Based Money Laundering

Trade-based money laundering (TBML) is estimated to account for $2 trillion of the annual $20 trillion in global trade. This article gives an high level overview of the nature of TBML, common techniques and risk indicators that help to detect TBML.

The Pandora Papers and the Effect on AML Compliance Teams in the Future

The Pandora Papers have given the world an unprecedented look into the financial system used by many of the world’s most powerful and wealthy individuals. This large investigation will most likely affect AML compliance teams, KYC best practices, and even sanctions imposed by regulatory authorities.

Sanctions Compliance for Crypto Businesses

This guide will help to understand the Crypto Industry’s specific challenges, how to identify red flags and implement best practices for a comprehensive compliance process.

The EU Looks to Overhaul their AML and CTF Approach

The EU’s AML regulations are often interpreted differently from one nation to the next, and legislative gaps in one country can lead to negative impacts across the EU.
As a result, the EU is looking to overhaul its AML and CTF approach.

AML Guide for Tax Consultants

Tax Return

This guide will review the risks that tax consultants face regarding Money Laundering as well as what procedures they need to have in place to address these.

AML Guide for Law Firms

This guide will provide an overview of how Law Firms are affected by Money Laundering, which regulations need to be taken into consideration, as well as compliance best practices.

FATF High-Risk Jurisdictions 2022

high risk jurisdictions

The Financial Action Task Force, or FATF, publishes a list of high-risk jurisdictions to enhance anti-money laundering policies and procedures. All regulated businesses should be familiar with these jurisdictions, as working with them can affect your AML screening process. Failure to comply can lead to strict sanctions, so keep reading to learn more about what this means for your business.

AML Guide for the Insurance Industry

AML Guide Insurance Industry

This is a complete guide to why the insurance industry is a target for money laundering, and the associated legal framework to prevent and detect it.

AML Guide for the Real Estate Industry

Money laundering is a concern in many industries, and real estate is no exception. This guide will help you understand the AML considerations for the real estate industry and why implementing these practices are so important.

AML Guide for the Cryptocurrency Industry

Financial institutions are subject to AML regulations because they face a direct risk of being abused for money laundering and terrorist financing. This guide will detail all of the regulations that apply to the Crypto industry as well as how they should be reflected in their business operations.

AML Guide for the Gaming & Gambling Industry

Gaming and Gambling

Complying with AML regulations is essential for all regulated businesses – this includes those in the gaming and gambling industry. This guide will review the significance of the gaming and gambling industry, what AML regulations apply, and best practices for implementing an anti-money laundering framework.

The EU’s 6th Anti-Money Laundering Directive (6AMDL)

The European Union’s AML directives aim to protect financial systems from money laundering and terrorist financing. Although each member state can design a unique framework to support these directives, they serve as common goals for each of them. Failing to comply with these legal procedures can also lead to punitive actions like fines and penalties.

GDPR Data Privacy Considerations for Business Partner Screenings

Data Privacy

Regulated entities are required to conduct business partner screenings to remain compliant with Anti-Money Laundering (AML) and Counter Terrorist Financing (CFT) regulations. These screenings, which include PEP and Sanctions Lists screenings, involve personal data and hence GDPR data privacy regulations must be taken into consideration.
Let’s dive into GDPR and how it affects business partner screenings.

Best Practices For Your PEP Screening Process

PEP screening is an important aspect of Anti-Money Laundering and Know Your Customer (KYC) regulation. It involves validating a customer’s identity to determine if they are a PEP – a politically exposed person. While companies are of course not not prohibited from working with somebody on a PEP list, there are additional due diligence measures that are required.

A Quick Overview of the EU’s 5th Anti Money Laundering Directive (Video)

The EU Directives are legislative acts that establish common goals for all EU member states. Each country has the flexibility to determine its own framework to meet these directives, so long as they are met. Although these are legally non-binding, failure to comply can lead to fines and other punitive actions. Get an overview of what you need to know about the EU’s 5th Anti-Money Laundering Directive in our short video.

The EU’s 5th Anti-Money Laundering Directive

The EU Directives are legislative acts that establish common goals for all EU member states. Each country has the flexibility to determine its own framework to meet these directives, so long as they are met. Although these are legally non-binding, failure to comply can lead to fines and other punitive actions.

Let’s dive into everything you need to know about the EU’s 5th Anti-Money Laundering Directive!

The Cost of Neglecting Sanctions Checks (Video)

Sanctions lists and PEP (Politically Exposed Persons) lists screenings are required as part of Anti-Money Laundering (AML), Counter Terrorist Financing (CTF) and Know Your Customer (KYC) compliance.
Get a quick overview about the risk for non-compliance with AML regulations in our video.

High-Risk Industries for Money Laundering and Terrorist Financing

Money laundering and terrorist financing are a risk in every industry, but certain industries pose higher risks than others.
Let’s take a look at what money laundering and terrorist financing are, and what types of activities and industries have greater risks.

AML Regulations in the European Union

The European Union has several AML and KYC regulations in place to prevent money laundering and terrorism financing within its financial systems. This is an overview of existing regulations in the EU and in its member states.

AML Regulations in the UK After Brexit

The European Union has an extensive anti-money laundering (AML) framework in place, and there are many questions about the implications of AML regulations in the UK after Brexit.
Let’s dive into what the current AML regulatory landscape looks like in the UK, and what changes may be in store after Brexit.

AML Regulations and Cryptocurrency Businesses

Anti-money laundering (AML) and counter-terrorism financing (CTF) laws apply to regulated businesses around the world, and failure to comply with these rules can lead to costly penalties and sanctions. While these regulations are generally viewed in the scope of traditional financial institutions, they also pose implications for cryptocurrency businesses.

The Cost of Neglecting Sanctions Lists Checks and PEP Screenings

Sanctions lists and PEP screenings are required as part of Anti-Money Laundering (AML) Counter Terrorist Financing (CTF) compliance. The Financial Action Task Force (FATF) requires that PEP and sanctions lists screenings be completed when onboarding customers and establishing a new business relationship. Failure to complete the screenings or following Know Your Customer (KYC) requirements will result in expensive fines and sanctions.