What is Anti-Money Laundering (AML)?
The fight against money laundering is essentially about the efforts (and legal provisions) that force financial institutions to actively monitor their clients to prevent money laundering and corruption. These laws also require financial institutions to report on the financial crimes they find and do everything to stop them.
A challenge for financial organizations
Compliance with the anti-money laundering directive and regulation is becoming increasingly difficult for financial institutions and related financial organizations. Detecting suspicious money laundering cases, transactions and identifying the clients involved is a growing challenge as suspicious cases need to be screened in a rapidly changing technology environment. In addition, new requirements set out in ever-tightening legislation must be met.
Governments and financial authorities publish sanction lists to help financial firms determine who and what are the ineligible persons and businesses. Sanctions lists may include individuals, organizations or even entire countries. The list also identifies third parties who do not directly commit crimes, but act on behalf of others who do so.
Some of the best-known sanction lists are:
- Consolidated list of persons, groups and entities subject to EU financial sanctions
- OFAC sanctions list and search
- FBI’s most wanted terrorists list
- Bank of England sanctions list
- World Bank listing of ineligible firms and individuals
- sanction lists recommended by the MNB (Central Bank of Hungary)
International environment
FATF – Financial Action Task Force
The Financial Action Task Force (FATF) is an intergovernmental body set up in 1989 by the ministers of the member states’ jurisdictions. The purpose of the FATF is to combat money laundering and terrorist financing and to prevent further acts that threaten the integrity of the international financial system. In addition, the main task of the organization to define the related regulations and to facilitate the effective implementation of legal, regulatory and operational measures. The Task Force has 37 member states.
UNODC – United Nations Office on Drugs and Crime
Beside the FATF, the United Nations Office on Drugs and Crime is proactively trying to identify and stop money laundering. The Office provides software that can be used to prevent financial crime, to collect data and to carry out analyzes.
The verification
Verifying new and existing clients imposes significant administrative tasks on organizations subject to the law. Failure to perform these checks is very risky as it may result in significant financial penalties and in a significant loss of reputation. Under extreme circumstances, the permission of the concerned financial institutions may be withdrawn.
However, meeting the requirements of 5MLD or 5 AMLD (Fifth Money Laundering Directive) is incredibly time and resource consuming.
Fintechfuture’s article about compliance change illustrates what changes have been made in 5AMLD and how they affect financial organizations, especially the severity of penalties.
Manual checks also carry the risk of human error. As a result, the financial organizations involved are striving to automate these processes with the most effective solutions. But what are these processes and solutions?
Anti-Money Laundering processes and solutions
AML – Anti-Money Laundering Software
Anti-money laundering software is used by legal and financial institutions as part of efforts to combat financial crime, namely to detect, identify and report money laundering activities. These solutions are applied to filter suspicious transactions by using machine learning algorithms.
KYC – Know Your Customer Software
Customer identification (due diligence) software or a business process whereby a financial institution performs customer identification (ID, fingerprint, face recognition, etc.).
CDD – Customer Due Diligence
Customer due diligence process whereby customer information is collected and evaluated for potential risks to the organization or money laundering / terrorist financing.
CSIWEB’s article on the challenges of real-time due diligence also highlights the issues that need to be overcome in order for audit processes to be successful.
How can Enterprise search help?
The information obtained during client identification and due-diligence process should be cross-checked with the data in the sanctions lists. The easiest way to do this is to apply a particular enterprise search engine interface that makes it effective to find matches in multiple lists (databases) at the same time. The entity recognition and name matching solution integrated in the advanced enterprise search engine allows not only to provide relevant results for exact matches, but also if the query accomplished by characters of a foreign language or misspelled (typo) by the user.
It is easy to see to what extent can a specially designed enterprise search engine be to eliminate the hidden risks that could lead to fatal consequences. Avoiding these consequences is crucial for both the financial organization and the society.
Learn more about TAS Enterprise Search from our previous blog post: How does an enterprise search engine work?
Our company has extensive experience in developing enterprise search engines. Thanks to Rosette text analytics solutions developed by our strategic partner Basistech – our TAS Enterprise Search has outstanding efficiency in identifying entities (names, organizations, dates, etc.). We provide Hungarian product support for Basistech’s text analytics solution for AML & Due Diligence and for Rosette AML name matching solution, which makes sanction list monitoring more efficient.Whether the partner is a participant of the financial, security or other sectors, we always provide our clients a unique search solution.
If your business is also affected by anti-money laundering legislation and it is essential to reduce the business risk by an advanced enterprise search engine, please write us or send a message using the contact form below.
