To remain in compliance with the Anti-Money Laundering/Counter-Terrorism Financing Act, businesses are required to implement and operationalize an effective Anti-Money Laundering (AML) program that helps mitigate the risk of engaging in fraudulent activities and better detects illegal transactions.
But AML programs shouldn’t be considered as just another regulatory burden that has to be complied with. Not only is it a major form of security intended to protect your business, but a well-designed and properly executed AML program comes with some significant advantages.
Here are some ways an effective AML program can help strengthen your business:
Technological advancements come with a rise in fraud
As technology continues to improve at alarming rates, the financial infrastructure has seen a massive shift towards the online space, as internet-based payments and currencies are steadily becoming the norm. While it does come with significant advantages such as an unprecedented level of convenience and lower labour costs, it also brings along a much higher risk of fraud via methods like phishing scams.
Since the beginning of the pandemic, there have been over 5000 cases of COVID-19 related scams in Australia alone, which has resulted in the loss of more than $6 million. The most common scams include personal information phishing and online shopping scams.
With an effective AML program in place, businesses are far more likely to detect and prevent such fraudulent activities and, in turn, avoid being overrun by customer claims and chargebacks.
Not complying comes with steep penalties
Being found in non-compliance with AML/CTF laws comes with dire repercussions which are not only limited to heavy monetary fines. Your business could also incur a substantial loss of credit rating and even a provisional or indefinite shutdown.
A great example of this is a recent money-laundering scandal from earlier this year involving a bank and financial services provider in Sweden. It was discovered that the bank had glaring deficiencies in its AML risk management, which caused the Swedish Financial Authority to issue them a whopping four billion Swedish kronor (US$385 million) fine. This, of course, doesn’t include the resulting major drop in the bank’s market value and the huge hit it took on its credit rating.
If your business is known for its stalwart security measures, customers are a lot more likely to feel safer from fraudulent activities during their transactions with you. Earning a bad reputation from being associated with fraud cases causes a sharp loss in customer trust and, subsequently, a serious drop in market value, as was the case with the Swedish bank’s money-laundering scandal.
That being said, creating a business that is known for its security hinges heavily on having an effective AML program.
Being more prepared for new regulations
As money-laundering methods continue to evolve, so do the regulations that are meant to keep them in check. With a flexible and future-proof AML program, your business can adapt to changes in laws and regulations more easily and can integrate with newer protocols and technology more fluidly.
Becoming a more attractive destination for top talent
Whether it’s with banks or pretty much any business for that matter, people always place a premium on security. If your business manages to earn people’s trust and makes a name for itself on account of its dedication to a higher standard of security, you will inevitably attract your fair share of talented individuals eager to work with you.
Those are just a few of the many benefits that come with investing in a great AML program. With money-laundering activities being at an all-time high, AML efforts have never been more important.