Demystifying AML Regulations for Non-Financial Professionals

Understanding AML Regulations Outside the Financial Industry

Nowadays, any business, not only banks, accountants or law firms, has to understand compliance. With the rise of regulatory pressure, professionals in tech, real estate, the law and retail are becoming more familiar with AML regulations—short for Anti-Money Laundering regulations. Still, for those outside the financial industry, the term might not make much sense.

This article is written to explain AML regulations clearly for people or businesses outside of the financial sector and what they should know to follow the rules.

What Do AML Regulations Mean?

First, we’ll cover the basic question: What are AML regulations?

AML regulations exist to stop criminals from making their illegal money look legitimate. Most of the time, money laundering involves moving money through a series of transactions to hide that it comes from drug trafficking, corruption, tax evasion or financing terrorism.

The answer to this has been for governments to make AML laws and regulations that require companies to search for, avoid and let authorities know about suspicious activities. As well as financial regulators, crime agencies and the FATF also enforce these rules.

Why AML is Important Outside the Financial Industry

Most people think that AML compliance involves just banks and financial institutions, but the truth is that it now touches many other industries too.

For example:

• Agents need to report major cash deals and verify buyers’ information before any sale.
  
• Law firms have to follow AML rules when managing their clients’ cash or helping with real estate transactions.
  
• Because digital currency is growing, crypto companies and fintech platforms must follow strict AML rules.
  
• Luxury goods sellers, casinos and art dealers can all take part in money laundering.
  

Therefore, people in non-financial industries should now become aware of AML requirements and do what they can to keep risks down.

What Makes Up AML Compliance Regulations

Even though the details may differ by country or industry, most AML laws and regulations have the same basic requirements. These are the essential things you should know:

1. The process of Customer Due Diligence (CDD) is known as KYC.

Firms should always be aware of who they are working with. You should check that each customer is who they say they are and learn about their activities. You will occasionally be required to identify the beneficial owner, meaning the person really in control of the customer.

2. Reporting and Keeping an Eye on Suspicious Movements

When a relationship is formed, businesses have to watch for unusual activity in their transactions. If an event looks suspicious — such as unusually large sums of cash being paid out or questionable transactions — a SAR should be filed by the bank.

3. Record-Keeping

Businesses are required by AML to maintain detailed records of transactions, customers and due diligence for a long period. Such records are very important during investigations or audits.

Employees need to learn how to identify signs of money laundering. Even if you don’t have a traditional financial job, it is important to understand how AML risks appear in your field.

Rules and Laws for AML Around the World

Countries have their own AML regulations, but the FATF (Financial Action Task Force) creates the main international standards for all.

• Compliance in the European Union is set by the AML Directive and its standards are updated every so often to stay ahead of new threats.
  
• Because Singapore and Hong Kong act as financial hubs, they have put in place strong AML systems.
  

Understanding the rules against money laundering in the countries you operate is necessary, regardless of your business.

Common Mistakes About What AML Regulations Require

Even though AML may not seem relevant to most, the idea that it only affects cash handlers is a dangerous idea. These are the typical misconceptions you should be aware of:

“Since we do not handle cash, we have no risk.”
It’s also possible to launder money through digital means. AML monitoring is taking place more regularly on online marketplaces and e-commerce websites.

“Only large companies should be concerned about AML.”
It is often the case that criminals choose small businesses since their controls might be less effective. AML requirements are in place for any type of company.

“Because we’re not a bank, we don’t have to follow AML rules.”
That’s true, but if your business is a law firm, an accountant, a real estate agency or a tech platform managing transactions or customer money, AML rules still may apply.

Practical Steps for Today

You don’t have to work in compliance to follow these simple rules:

• Make Sure You and Your Team Know the Basics – Understand what you are required to do in your region and line of work.
  
• Team up with the Compliance Team to learn what you should do.
  
• Explore Technology – If you do business online, use systems that confirm customers and watch transactions closely.
  

Conclusion

Recent changes mean AML rules are not only for financial institutions. With stiffening regulations against money laundering being introduced, everyone in various industries should join the effort. Not only do you need to understand AML regulations and their impact on your job, but also because they keep your business and your name safe.

Anyone outside the finance world can play a useful role by staying informed and leading the way toward better transparency in world finances.

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