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Importance of Anti-Money Laundering Compliance For Enterprises

If you are an enterprise executive reading this, you most likely face the need to obtain the board’s buy-in on implementing an AML compliance strategy and solutions for your company. We will not bore you with historical references and excursus, and jump straight to business. Below are five reasons why Anti-Money Laundering compliance is crucial for enterprises.

Just to ensure we are all on the same page, we need to provide a brief definition of what is anti-money laundering strategy for enterprises.

According to one of many anti-money laundering definitions, it is a holistic strategy aimed at detecting, preventing, and reverting illegal activities aimed at reinserting the proceeding from illegal activities into the financial system.

Now let’s take a look at what AML means from the aspect of daily operations and the value it provides to enterprises.

Meeting regulatory requirements

Since the 9/11 attacks in 2001, the international Financial Action Task Force (FATF) and other AML law regulators worldwide have levied heavy fines for organizations related to terrorist financing and money laundering. In the last decade alone, the sum of such fines has exceeded $32 billion. 

Your company DOES NOT want to be on the receiving side of this hammer.

Meeting evolving threats

Cybercriminals can be roughly split into three large groups:

  • Lone wolves, who sell or purchase weapons or dangerous substances and need to hide the source of their income;
  • Technology-enabled criminal rings, who make use of the latest technology and exploit the flaws in financial systems to launder their illicit gains
  • eCommerce fraudsters, who use the eCommerce industry as a front for money laundering, posing as merchants or payments providers. With the eCommerce market growing to nearly $2.4 trillion due to the pandemic, this group becomes the most numerous. 

Even if they are not the most dangerous, the fines for processing chargebacks and fees for fraudulent transactions can form quite a hefty sum, up to 5-10% of the revenue.

Securing the brand’s reputation

Enterprises have long-established brands and their reputation costs a lot. Being involved in AML investigations, or even worse, being fined for non-compliance is a very bad PR for any enterprise. Customers tend to distrust brands associated with money-laundering scandals, so the reputational risks and the loss of business can cost much more than the non-compliance fees. These fees and fines are also constantly rising, from around $4 billion worldwide in 2018 to nearly $8 in 2020.

Manual risk mitigation costs

Checking every customer and every transaction manually is a tedious, time-consuming, and effort-heavy job that costs enterprises a lot. Back in 2018, it cost US financial services more than $23 billion to check the daily transactions, and the price is going up every year. The pandemic and moving to global remote work resulted in an even bigger increase in the costs of manually checking risky transactions. Well, you definitely know that if you look for a tool for KYC/AML automation.

Slow client onboarding

Manual KYC checks take time, and time is of the essence in today’s fast-paced world. When your employees need to contact the customer several times or the customer has to provide several proofs to confirm their identity, the risk of a customer leaving without making a purchase is quite high.  33% of enterprises lose clients on a regular basis due to the slow customer onboarding process. On the other hand, accepting payments from anyone without verification is not possible, unless your company is ready to be named an accomplice in a money-laundering scheme.

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How to avoid these threats and mitigate the risks?

The best way to prevent your company from being fined for AML non-compliance is to implement automated KYC/AML checks for every customer and transaction. For example, Covery provides a wide range of features — from daily PEP/RCA/sanctions watchlists updates download directly from Dow Jones databases, all the way to AI-powered analytics, Trustchain reputation record database, behavioral analysis and device fingerprinting. 

These features enable Covery to monitor every transaction and flag suspicious ones on the fly. This is possible due to in-depth analysis of multiple device and customer identifiers and building granular rule-based risk logic scenarios for every business. Clear REST API integration ensures interoperability with any enterprise-grade CRMs and other tools to guarantee efficient anti-money laundering strategy implementation, risk mitigation, and fraud prevention.

Should you want to test Covery out and get a free demo of what the system can do — feel free to contact Covery and we will be glad to assist!