How to Create an AML Compliance Program

An AML Compliance Program to monitor for anti-money laundering compliance is required for all financial institutions — including banks and credit unions — to fight financial crime.

What is an AML Compliance Program?

AML compliance programs are necessary to detect and prevent terrorist financing activities and money laundering. All financial institutions should follow the procedures and regulations that are a part of the AML program, and should understand what the program needs to accomplish in order to create a program which works for them.

Purpose of an AML Compliance Program

An AML program should ensure that an institution is able to detect and report on potential acts of tax evasion, fraud, and terrorist financing, along with other suspicious activities associated with money laundering. 

Additionally, an AML compliance program should focus on the risk posed by the business’s customer or client activities. 

It is crucial that an AML program is overseen by experienced and knowledgeable personnel who are capable of creating compliance at every level of their organization. The program should, therefore, be built on a strong foundation of regulatory understanding among all users. 

Creating An AML Compliance Program

It is senior management’s responsibility to create policies and procedures that best fit their organization, and build a program around key criteria when developing an anti-money laundering compliance program.

Risk

The crucial first step in building an effective AML compliance program is risk assessment. Every institution faces different sets of AML risks, and your program should factor in your geographic location, your customers and clients, and the products and services your institution offers. 

There is no universal solution to the challenges of the financial landscape. The way you approach AML risk management should suit the needs of your company and will, ideally, avoid both over- and under-compliance.

Internal Controls

The main focus for your AML compliance program should be the internal controls and systems, used by your company, to detect and report financial crime, and should involve frequent review of these systems. This is necessary in order to measure their effectiveness in meeting compliance standards. 

Companies’ employees have to be aware of their roles and responsibilities within an AML system. They should know how to ensure compliance on an ongoing basis by knowing how to navigate policies and conduct due diligence on business interests. 

Independent Audits

Independent auditing and testing of AML compliance programs by outside organizations should take place every 12-18 months, or more frequently if dealing in high risk areas. These third-party organizations must be qualified to conduct risk-based audits in order to help create an effective program. Internal teams independent from the AML and Compliance group may also perform the audit if part of a large institution. 

AML Training

While some employees will have more responsibility for the implementation of its companies compliance program, every employee should receive base level training and then build on that training for those with more AML-oriented responsibilities. Your companies AML program should ensure that those employees receive regular training in order to perform assigned duties. 

AML compliance training programs are offered by many companies to help employees, to help update their knowledge and competencies.

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