Sanctions and AML Insights

Understanding sources of funds and sources of wealth form a crucial part of combatting money laundering and terrorist financing. When sources of funds and wealth do not match the profile of customers or potential customers are involved in criminal activities. Financial companies have a duty to report their suspicions to relevant domestic authorities.

Identity theft has become a significant problem as cybercriminals use increasingly sophisticated techniques to commit fraud. In 2021, there were more than of identity frauds reported in the UK alone, with criminals targeting the elderly. 22% of reported identity theft cases in 2019 were for the purpose of gaining access to bank accounts. However, the industry is fighting back as artificial intelligence (AI), and machine learning techniques are being deployed to combat identity theft through smarter ID verification techniques.

Western nations have imposed stringent sanctions on Russia following the attack against Ukraine in February 2022. Within weeks, the country lost half of their imports and their manufacturing facilities are struggling to obtain the components they need to remain operational. However, the Russian government continues to increase their war spending, even as its revenues are shrinking. Some have questioned whether the sanctions are achieving their desired results - or simply hurting the ones imposing the sanctions. No doubt about it: the world needs Russia’s exports. However, rather than back down or relax sanctions regimes, Western nations are finding ways of mitigating the impact of sanctions on their own economies. Here are just a few of the ways Russian sanctioning has been felt (and dealt with) around the globe:

Money mules are individuals who transfer or otherwise move illegally acquired money on someone else's behalf, usually as part of a money laundering scheme. Money mules are often recruited to "clean" the proceeds of online scams or even crimes like human and drug trafficking.

Stringent international steps against money laundering require organizations to take robust steps in detecting and reporting suspicious activities that may indicate that financial crimes are taking place through their business. Transaction monitoring refers to the process of observing customer transactions in real-time, or even retroactively, to spot red flags and identify risks in senders and beneficiaries. While this may seem straightforward, it requires screening large volumes of transactions against encoded rules and available sanctions lists. Most companies use software to ensure that they can thoroughly and accurately monitor customer transactions.

It may seem as though there is an ever-growing list of sanctions against Russia, Belarus and other territories. As a business, it’s challenging to stay on top of these sanctions, putting you in danger of non-compliance. All businesses in all sectors need to comply with sanctions, including charities and non-governmental entities. Fines are not only issued to those who are in violation of sanctions but for failing to implement adequate controls to prevent those violations.

Financial criminals generate profits from their acts and often disguise these proceeds through money laundering, enabling criminal parties to use their funds without jeopardizing their activities. According to the United Nations Office on Drugs and Crime, between EUR 715 billion and 1.87 trillion is laundered every year (2-5% of the global GDP). The changing global risk landscape, including the advent of innovative fintech start-ups, virtual payments and cryptocurrencies, requires a fresh approach and stricter controls than ever before.

In today’s complex regulatory environments, businesses have to be careful about who they have business dealings with. Enhanced Due Diligence is an advanced KYC due diligence process that provides additional risk investigation into high-risk customers or large transactions. Knowing your customers’ past and present business dealings and their links to high-risk countries or entities can significantly lower a business’ risk of regulatory fines and other penalties.

Anti-Money Laundering refers to the laws, regulations and procedures aimed at uncovering the efforts unscrupulous parties may make to disguise illicit funds as legitimate income. Here are just a few of the terms you should know when it comes to AML Compliance: