how identity verification can help improve aml
how identity verification can help improve aml

Using Identity Verification to Improve AML Compliance for African Businesses

0 Shares

According to research by Africa Growth Initiative, between 1980 and 2018, sub-Saharan Africa received nearly $2 trillion in foreign direct investment (FDI) and official development assistance (ODA) but emitted over $1 trillion in illicit financial flows. As technology improves, fraudsters are becoming more and more sophisticated. Money launderers and terrorists are identifying weak points in companies’ AML/KYC (Anti-Money Laundering/Know Your Customer) procedures to help them hide the trustworthy source of funds, their connection to it, and carry out their illegal activities.

To stay ahead of fraudsters, you must be ready to deploy and implement the necessary processes that will b– LOCK access to those that want to bypass your security in the first place. This entails that your prevention systems should be more robust and secure. Effective Anti-Money Laundering (AML) systems ensure that AML compliance is fundamental for every legitimate business. Implementing effective policies, procedures, and technologies helps protect your organization and boosts your brand’s reputation. It is, however, not enough to meet the minimum requirements; you need to integrate systems that are flexible, efficient, and cost-effective- the best solution is deploying the use of automated identity verification platforms.

What Is Money Laundering?

Money laundering, according to the UN Vienna 1988 Convention Article 3.1, is described as follows:

“the conversion or transfer of property, knowing that such property is derived from any offense(s), to conceal or disguise the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.”

Money laundering typically follows three stages before laundered funds can be released into the legal financial system, and these include:

  • Placement ( moving the funds from direct association with the crime)
  • Layering (disguising the trail to foil pursuit)
  • Integration (making money available to the criminal from what seem to be legitimate sources)

As an organization or business owner, one of the ways you can measure success concerning AML (Anti-Money Laundering) compliance is to prevent getting fined for non-compliance and effectively prevent laundered money from penetrating your financial system.

Three innovative Practices to Improve AML Compliance

It is important to note that each jurisdiction has specific requirements for AML compliance, as there are currently over 1500 watchlists to watch, making it nearly impossible to monitor everyone manually. However, this article only examines three best practices that will improve your AML compliance rate irrespective of your business location.

Practice Customer Enhanced Screening

Screening a customer’s identity through biometrics or government-issued identifiers is standard practice in essential customer due diligence. However, it is more important that you perform customer-enhanced due diligence, which requires the capabilities of automation, advanced analytics, and configurable risk scoring for transaction monitoring. This will undoubtedly require you to stay abreast with the AML watchlist. Still, suppose your company hasn’t deployed automated ID verification with real-time transaction monitoring and screening. In that case, there is a high possibility of operating with an outdated watchlist and not being aware of the types of watchlists to watch out for. The implication is a high possibility of fraud, AML non-compliance, payment of non-compliance fines, and company liquidation. You can avoid these by simply knowing the types of watchlists available and deploying an automated ID verification system for your business.

Watch Out for AML Red Flags

To prevent Money Laundering and terrorist activities on your platform, you need to be vigilant and constantly be on the lookout for unusual activities on your customer’s account, such as sudden large cash transactions, drastic spikes in activity or amounts, transactions connected with cash-heavy businesses, such as gambling, transactions associated with businesses that have a history of money laundering, transactions related to individuals or companies that are potential money launderers.

These activities can be noticed in the initial due diligence process. During onboarding, there must be a clear guideline for everyday activities; these could be classified by account type, source of funds, predictable transactions, or other criteria. You must set up a process to determine when an activity is unusual and needs attention. Automated identity verification enables you to deploy the required standards and easily flag any unique customer activities.

Practice Customer Ongoing Monitoring.

Protecting your platform from money laundering activities and terrorism financing will require you to practice ongoing monitoring for your customers. Customer Due diligence goes beyond the onboarding checks alone, it needs to be done every step of the way, and this involves revalidation of customers, processes, and systems. This means you must be ready to conduct behavioral analytics, going beyond knowing your customers’ basic information such as name, home address, email, etc., to understanding a customer’s behavior over time. Ongoing monitoring will help safeguard your business against fraud and money laundering activities by quickly detecting certain irregularities in your customers’ patterns of transactions.

Get Started and Promote Online Trust On your Platform today!

Identitypass is currently available to businesses that want the identity of their designated customers and partners to be verified without interruption before engaging in business transactions with them. You can contact our team to get started as a new user. We have a combination of resources for you when you start with Identitypass. Check our documentation page for more information about our endpoints.

Leave a Reply