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All About AML: Anti Money Laundering

When it comes to money, we all want to know that our own is as safe & secure as it can be. Thankfully,  keeping money secure is a legal requirement for financial and payment institutions. Today, we'll focus on one particular element of compliance - Anti-Money Laundering (AML) - and discuss what it is, how it impacts you as a merchant and/or distribution partner, and where you can find trustworthy resources with up-to-date information.

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What is AML?

Anti-Money Laundering is a set of legislations and security controls required by EU law to stop financial criminals from presenting illegal funds as legitimate income. In short, it ensures that the money moving electronically through the EU can all be traced to a form of legitimate income. Because of this, institutions like Paynovate build comprehensive compliance structures to protect the integrity of our clients' accounts, as well as the security of our own services. These programmes ensure fraudulent behaviours (including money laundering, terror financing, and other criminal endeavours) are detected, combatted, eliminated, and ultimately prevented from entering the institution's funds flow.

This requires significant hard work, frequent due diligence, and occassional merchant fees to keep the programme on track.

 

How do Financial/Payment Institutions ensure AML compliance?

All institutions tailor their approach to their sectors, clientele, and risk level. According to our Head of Legal and Compliance, Alexandre Gau, the very first step to fight against money laudering is KYC (Know Your Customer):

KYC ensure that the financial insitution conducts all the identification's verifications before entering into a business relationship with the client. Financial institutions, like Paynovate, must be able to identify and verify the identity of their customers throughout the business relationship. That's what we call the KYC process.

Knowing your customer (KYC) is not only about getting name and address, it is also verifying and understanding with certainty the operations, services or transactions that the client will perform. KYC vigilance procedures are part of the due diligence requirements that obliged entities are expected to implement and follow to prevent the use of the financial system for money laundering and terrorist financing.

Know Your Customer (KYC) refers to the identification of the user and by extension his agents, proxies, representatives or beneficiaries. Identity information (surname, first name, date of birth, register number, home or headquarters address, articles of association, shareholding structure, company number, etc.) must be proved by means of official evidence. 

The information is verified with sufficient certainty and must comply with the duties of care imposed by the AML regulations, which incorporate the KYC standards. When the KYC is done, then we have to make sure that the transactions are well monitored.

 

As Alexandre explains, once this first round of due diligence is undertaken, we can begin the business of monitoring and prevention. Though all institutions tackle this differently, they do have a structure in common as outlined by London-based identity verification provider SumSub; there are 5 Key Components to any AML compliance programme, regardless of region, country, or jurisdiction.1 

Detecting Suspicious Activity

This first pillar of AML compliance is for the institution/company processing the funds to keep an eye on account activities. Things that would raise the AML 'red flag' would include:

  • Unusual activity on an account, ie, large sums of money arriving in IBAN accounts or abnormally high acquiring amounts;
  • Attempting to open IBAN Accounts with little verifiable personal/corporate information;
  • False or fake data input in contract fields, applications, or other documentation used to create an IBAN or acquiring account;
  • plus many more.

These can be the first warning signs of illegal activity, and trigger an immediate investigation by our compliance team and, if necessary, escalation to regulatory bodies.

Risk Assessment

Part of any Paynovate contract is due diligence. Our legal and compliance team investigate each new client to ensure that they are only operating in ventures that result in legal income, and that they have not been involved in any illegal ventures in the past. We base our core practices on the regulations set by the EU Commission, and ensure that all our contracts and clients are in good standing in their local AML jurisdictions as well. We make use of several highly trusted tech partners, including iDenfy, to verify the identifying information we receive from potential clients and prevent the opportunity for fraud. 

Internal Practices

As part of the Loyaltek Group, keeping payments solutions simple, secure, and effective is our top priority. Because of this, internal structures to assure AML compliance and fraud prevention are set and overseen by Alexandre. These practices include, but are not limited to:

  • Due diligence procedures;
  • Clear roles and responsibilites for risk assessment and monitoring across departments;
  • Reporting structures that allow us to flag a client account should suspicious activities occur, which escalate from alerting management to contacting regulatory bodies if the situation warrents this further escalation.
Prevention of Criminal Attempts

This pillar of AML compliance is mainly a matter of training: training for our legal, sales, and management team members. This way, we assure that there is awareness of how to spot risky behaviours, what to do if a possible compliance issue is found, and which regulations apply to which of our clients. As is often said, the best defense against fraud is prevention.

Independent Audits

We frequently work with independent auditors to confirm that our compliance structures are aligned with the regulatory requirements, and that our team is properly addressing potential risks in the correct fashion as they arise. We support this human action with sophisticated AI technologies that track behavioural trends and pinpoint instances where fraud is possible.

 

 How does AML impact me and my business?

AML and other compliance regulations are designed to protect both you and the payment entities you entrust with your money. When you receive a fee or other contractual bi-line referrencing payment for AML, this is the service cost for due diligence and protections. We are always looking for ways to minimise the impact of legal requirements on our clients, and will always keep you up to date on the latest rules that impact your Paynovate contract.

 

Where Can I Find Trustworthy AML Resources?

 For more information on AML, you can check any of the below resources: they are trusted entities that can help you better understand the who, what, why, when, and how of AML and other security compliance structures.
 
The European Commission

The European Commission's website includes all the latest news, documents, and information regarding all things banking and finance in the EU. They host a dediated timeline of the latest developments on AML, the context of AML inside of the EU (as well as the International context), and a variety of documents. 

 
AML RightSource

AML RightSource has an extensive newsroom that addresses nuanced questions surround AML, compliancy, improving risk management, and much more.

 
Association of Certified Anti-Money Laundering Specialists (ACAMS)

ACAMS is a global organisation with a mission to fight financial crime. They are a highly trusted voice in the world of AML, providing frequent seminars and certifications for its members as well providing a variety of resources online for free.

 

 

 

Are you ready to talk with our team about using the Power of Paynovate for your prepaid card issuing, global acceptance acquiring, or IBAN account needs?

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1 '5 Key Components of an AML Compliance Program: How to develop your AML compliance program in line with global regulations'. SumSub. 2022. <https://sumsub.com/knowledgebase/aml-compliance-progam/>