Have you ever wondered how financial institutions keep their security tight from fraudsters and criminals? The most common way of protecting the assets of financial institutions is by placing them in a vault with the best security features. Unfortunately, however, there are still criminals that use banks and other financial institutions to launder their money.
Money laundering is an unlawful activity that involves acquiring money from illegal activities like crime and using banks to “clean” money. It makes it appear as if the person received it legally. Fortunately, many businesses have an anti-money laundering system that helps them detect if a client is doing an illegal activity or not. Usually, every financial institution needs to comply with the AML/CT legislations to ensure their identity verifications can detect money laundering and other criminal activities.
What is the AML/CT program?
AML/CT means Anti Money-Laundering and Counter-Terrorism, and it has a program that outlines how a regulated organisation addresses the risk of aiding money laundering and terrorist financing. It is the development of procedures, controls, and policies any financial entity uses to recognise, reduce, and manage the risks.
An AML/CT program has to be consistent with the accordance from FATF and AUSTRAC on taking risk-based procedures to regulation, considering the chances of your business aiding in terrorist financing and money laundering, depending on its complexity, nature, and size.
You should also know that every reporting entity or organisation has its own set of special money laundering and terrorist financing risks, so they need to tailor their AML/CT program to certain regulatory and business risks. An anti-money laundering system is a reporting entity’s best chance of saving their company from costly penalties and criminal charges.
Do businesses need the AML/CT program?
The AML/CT program exists because countless criminals use businesses and organisations to launder their money or finance terrorist activities. Usually, you can tell whether your business needs the AML/CT program using the tool from AUSTRAC. You can also use it to comply with the AML/CT Act.
However, you can find several services that require the AML/CT program. One well-known service that needs it is cryptocurrency exchanges. You should know that cryptocurrency is challenging to track, so some businesses decline it whenever clients use it to pay for something. Another is investment services that many criminals have used over the years to fulfil their money laundering habits because of the large sum of money that each organisation receives.
Learning the two parts of the AML/CT program
You should also be aware that the AML/CT program consists of two programs called Part A and Part B, respectively. Part A needs to include procedures and processes to help a reporting entity recognise, reduce, and manage the money laundering and terrorism financing probabilities that you will encounter.
Part B of the program is centred on the methods of identifying beneficial owners and customers, including PEPs (politically exposed persons) and verifying whether they are the actual clients or not. And as mentioned a while ago, every program will be tailored to every reporting entity, ensuring criminals have no loopholes or silver linings for their illegal financial activities.
Make sure you use the AUSTRAC tool to determine whether you need the AML/CT program or not. But as long as you are a business that involves protecting clients’ financial assets, you need to get the program.