Adhering to the rules to avoid participating in money laundering activities
What is Anti Money Laundering (AML)?
Anti Money Laundering (AML), also known as anti-money laundering, is the execution of transactions to eventually convert illegally obtained money into legal money. Although you as a company stick to the rules, this does not mean that your partners and business associates adhere to the same AML compliance laws as you. Particularly in international business, you run the risk that the companies or individuals with whom you do business are not in compliance with the regulations set by the government. Conducting a due diligence investigation on your partners, suppliers but also customers is therefore essential.
Stages of anti-money laundering
The money laundering process includes 3 stages: Placement, Layering, and Integration.
- Placement puts the "dirty cash" into the legitimate financial system and at the same time, hiding its source.
- Layering or “structuring” hides the source of the money through a series of transactions and accounting tricks. This activity involves breaking the funds into small transactions and makes it difficult to detect the laundering activity.
- In the final step, integration, the now-laundered money is withdrawn from the legitimate account and real records to be used for whatever reasons the criminals have as a top priority for it.
Anti Money laundering laws or AML legislation is becoming increasingly strict for financial service providers. They must be prevented from financial crimes, financial action and / or terrorism.
AML activities, then, aim to fight this ongoing issue by establishing processes, policies and enforcement of regulations and laws that require businesses to actively monitor the entities with whom they do business. They target such practices as market manipulation, illegal goods trading, tax evasion, bribery and other forms of financial corruption under secrecy act.
Importance of research to prevent money laundering
The Money Laundering and Terrorist Financing ( Prevention) Act (WWFT) was created to prevent money laundering that finances terrorism. Pursuant to this Act, financial institutions must report suspicious activity or unusual transactions, but not report this - whether intentionally or not - and may be sanctioned. The United States Department of the Treasury is fully dedicated to combatting all aspects of money laundering at home and abroad, through the mission of the Office of Terrorism and Financial Intelligence (TFI).
In addition, you are obliged to do a UBO check regularly : who is the Ultimate Beneficial Owner of a company?
It is therefore very important that you regularly research partners, suppliers and customers ensuring adherence to AML regulations and compliance programs. Nexis Diligence is the tool that gives you the opportunity to screen individuals and organizations to take financial action. Enter the name of the organization or person and search the database for financial statements, past crimes, adherence to compliance laws and regulations and more. This ultimately gives you a professional and safe audit trail.
Nexis Diligence offers:
Company information and Profiles
Access to more than 400 databases and more than 200 million international, listed and private companies.
Sanction, PEP and Watchlists
To ensure that your organization does not work with a 'blacklisted' company, screen the company against all international sanctions, watchlists (1400 from more than 80 countries) such as OFAC, HM Treasury, FBI, UBO- data and more 800,000 PEPs (Politically Exposed Persons);
Negative news check
Check companies by searching over 60,000 national and international news sources, including newspapers, blogs and online news under secrecy act.
Search our powerful legal database for international cases and judgments;
Dig deeper into a person's background. Search resources such as Gale Biographies, SGA Executive Tracker, Professional Contacts, The Complete Marquis Who's Who Biographies, and The Official Board Biographies.
The 5th EU AML Directive
To combat money laundering as well as counter-terrorism financing (CTF), the European Parliament recently adopted the 5th Anti-Money Laundering Directive. Rather than a new law, this directive is an amendment to the EU’s 4th Anti-Money Laundering Directive, which aims to bring greater transparency to the financial system and prevent its use for the funding of criminal activities. Countries like Afghanistan has the highest money laundering risk score 8.16 followed by Haiti (8.15), Myanmar (7.86), Laos (7.82), Mozambique (7.82), Cayman Islands (7.64), Sierra Leone (7.51), Senegal (7.30), Kenya (7.18), Yemen (7.12).
The directive addresses such areas as:
- regulation of virtual currencies
- information on beneficial owners (persons who reap the benefits of ownership even though the title of a given property is in someone else’s name)
- use of anonymous prepaid cards
- powers of financial intelligence units (FIUs) – entities that help investigate and prosecute serious criminal activities, such as money laundering, terrorism financing, tax evasion, organised crime and financial crimes
- stricter due diligence requirements for business relationships or transactions that involve high-risk countries
EU member states, including the UK, must begin the enforcement of necessary regulations and laws and comply with the directive by 10 January 2020. The United Kingdom remains the global money-laundering capital with an estimated £90 billion laundered each year through the City of London.
With such widespread risk of corruption on an international scale, due diligence practices are more essential than ever. To protect yourselves from money laundering and regulatory non-compliance programs and ensure successful, above-board business transactions, companies must make sure they have timely and accurate business intelligence through due diligence checks.
A due diligence check is a procedure for identifying, evaluating and verifying all available information about an individual or entity. Conducting robust due diligence checks through a reliable source means you can have confidence in your business dealings.
Nexis Diligence™ AML solutions let you conduct enhanced due diligence checks and comprehensive research to investigate and monitor third parties, customers and other entities with whom you do business. Using the tools means you can stay compliant with international AML procedures and safeguard your business. The tools give you access to an unparalleled collection of global news and information all in one place, including:
- more than 150 databases of premium business information
- millions of public and private company profiles covering developed and emerging markets
- politically exposed person (PEP) lists, international sanctions lists and watchlists
- more than 26,000 current news sources from newspapers, blogs, and newswires, as well as an archive that dates back 40 years
- the LexisNexis® database of international court cases and decisions
- risk-analysis reports
- more than 500 biographical sources and executive profiles
What’s more, the Diligence® built-in report builder enables to you to produce customised time- and date-stamped reports to demonstrate your ongoing compliance efforts should you undergo any type of regulatory audit.
Ultimately, with a complete picture of the people and companies you’re dealing with, you’ll improve your decision-making power and be able to safeguard and grow your business with confidence.
Frequently Asked Questions
Answers to some popular questions
Anti Money Laundering (AML), also known as anti-money laundering, is the execution of transactions to eventually convert illegally obtained money into legal money. AML legislation is becoming increasingly strict for financial service providers. They must be prevented from financing money laundering and / or terrorism. Read more
Almost always, money that is laundered is usually sourced from criminal activities. This money makes its may to banks in different countries creating a gap in the economy or the money is used to fuel criminal activities, terrorism etc. Hence, it is extremely crucial to prevent Money laundering and monitor and any discrepancies in company or individual finances. It is therefore also important that you regularly research partners, suppliers and customers. Read more
The Money Laundering and Terrorist Financing ( Prevention) Act (WWFT) was created to prevent money laundering. Pursuant to this financial act, financial institutions must report unusual transactions, but not report this - whether intentionally or not - and may be sanctioned. Read more
By monitoring company information and profiles, screening Sanctions, PEP and Watchlists, tracking negative news about all stakeholder, partners, suppliers, searching legal databases and deep diving into backgrounds of individual's working on the project or partnering with your company. Read more