What are the AML Testing Procedures?

The Anti-Money Laundering (AML) is a set of rules that were created to ensure that individuals or organizations did not earn income through illegal means. These laws may only cover a few transactions, but their implications are extensive. These laws and regulations are aimed at stopping things like market manipulation, illegal goods trade, tax evasion and corruption of public funds, while also targeting activities that conceal these deeds.

1. What is Money Laundering? Money laundering is a term used to describe the way individuals/organizations cover up original ownership of an entity to facilitate criminal conduct, by making them seem to have come from legal sources. For example, money obtained using illegal activities like drug trafficking is run by perpetrators through many processes to make it look like they earned this amount legally. Though companies have spent fortunes on AML testing and implementation of the process, there are still a few hurdles that stand in their way like: • Swiftly increasing customer base • More than one source of income/funds • Less than clear view of risks attached to money laundering • No proper unique customer identification codes

2. Meeting Requirements Companies have to pass AML testing requirements nowadays – a process that is done by certain watch-dog organizations for developing and implementing AML compliance programs. A firm needs to: • Establish and implement policies and procedures that can help detect and report malpractices • Make sure that these regulations comply with the law • Get the program approved in writing by a senior member of management • Regulate the member’s compliance with the law • Make sure that these regulations need to be promulgated • Conduct annual testing for compliance with the help of a qualified personnel • Make these ‘checkers’ details available to the concerned body of law

3. Customer Identification is Essential One of the many AML testing procedures also includes passing the customer identification requirement. The company has to do the following to be able to function: • Establish basic details for all customers • Save and maintain a copy of each document of customers

Every government has become increasingly watchful so that money laundering can be controlled and prevented, and this was the reason why demonetization bill was passed by the Indian government last year. For this to work, however, companies and financial institutions also need to comply and keep systems in place to make it possible to catch and report money laundering activities.