Money laundering exacts substantial costs to individuals and institutions and can have devastating consequences for society. We do intensive due diligence on all our clients, involving Know Your Customer (KYC) and Anti Money Laundering (AML). All our clients must provide substantive documentation to align with these financial requirements before we can engage a client.
Beyond the moral imperative to fight money laundering and terrorist financing, we also use AML tactics for:
- Compliance with regulations that require them to monitor customers and transactions and report suspicious activity.
- Protection of their brand reputation and shareholder value.
- Avoidance of consent orders as well as civil and criminal penalties that could be levied because of noncompliance or negligence.
- Reduction of costs related to fines, employee and IT costs, and capital reserved for risk exposure.
How It Works
To identify and report potential money laundering and address compliance requirements, financial institutions must have a deep understanding of how the crime works. Money laundering involves three stages: placement, layering and integration. These are a complex series of transactions that start with depositing funds, and then gradually moving them into what appear to be legitimate assets.
Compliance Requirements
AML regulations vary by jurisdiction – but in general, financial institutions undertake the following measures to meet compliance requirements:
- Customer identification program/know your customer (KYC). Financial institutions must require proper customer identification and verification to ensure legitimacy. Higher-risk products and services (e.g., private banking) require more in-depth documentation.
- Large currency transaction reporting. Requirements call for institutions to file a regulatory report (known as a “CTR” in the US) for transactions above a certain threshold made by a single customer during a business day.
- Suspicious activities monitoring and reporting. Regulatory agencies publish AML guidelines about behaviour that should be monitored (e.g., making numerous cash deposits or withdrawals over several days to avoid a reporting threshold). If an AML investigator uncovers behaviour that exceeds reporting thresholds and has no apparent business purpose, they file a SAR/STR with the FIU to fulfil regulatory requirements.
- Sanctions compliance. Regulatory bodies such as the US Treasury Department, US Office of Foreign Assets Control, the United Nations, the European Union, Her Majesty’s Treasury and the Financial Action Task Force on Money Laundering have requirements for financial institutions to check transaction parties against lists of sanctioned individuals, companies, institutions and countries.
Disclaimer
Eyetoeye Capital (EC) does not offer securities. EC is not a United States securities dealer or broker or a United States investment adviser and neither this email nor any other documents we publish is an offer to sell, or a solicitation of an offer to purchase any securities instrument.
EC is not a financial advisor. The content of EC communications and documents is provided for informational purposes only and cannot be substituted for professional financial advice. Always seek the advice of a qualified financial advisor with any questions you may have regarding a financial matter.
EC does not provide any form of advice (investment, tax, or legal) EC has the role of an information provider for transaction principals and makes no representations, recommendations or warranties as to any financial instruments, products, and transactions. All due diligence regarding any transaction is the responsibility of the recipient who receives information from EC.