Importance of AML/KYC Compliance: Consequences of Violating Rules

The corrupt practices of business entities pose a greater risk to banks because they are going to be the holders of that money as a safeguard for the businesses. Thus in order to ensure safety for itself, the banks need to comply with Anti-money laundering measures, they strictly need to abide by the rules and regulations developed and imposed by the government. It will not only strengthen its reputation in the market but also build a sense of trust among its customers that it does not permit any wrong entity to damage its reputation or even compromise the safety of the transactional process. 

Biggest Penalties in the History of Money Laundering

Violation of AML Guidelines by The United States of America

Sometimes, it happens that we read a certain piece of information and think that it might be exaggerated than what actually the reality would be. Well, that is not the case in the context of money laundering. It is as strict in punishment as it sounds if the regulations are violated in case. In the history of the US, a man from the company named money gram was charged with the highest penalty of all time. A fine of two lac fifty thousand dollars was imposed upon him in case of money laundering 

Ignorance of AML Compliance by Australia

In another country, Australia, a huge amount of fine was imposed on the Commonwealth Bank of Australia for not abiding by the rules and regulations of Anti-money Laundering and breaching the CFT laws as well. The fine was reported to be amounting to 700 Australian dollars.

Netherland failed to fulfill the legal requirements of AML

Similarly, the Netherlands had to face a huge penalty amounting to 900 dollars. This is because Netherland failed to comply with the stated rules and regulations quoted in the documents of the Financial Crimes Compliance Controls. Repeated crimes in the context of money laundering have given birth to fines crossing the range of billions. 

Breach of AML KYC Regulations By Some Famous Banks 

Standard Chartered Bank

Reports have shown that Standard Chartered Bank was one found to be guilty of a KYC compliance breach. It was found to be involved in money laundering in two high-risk areas of its business which resulted in a huge penalty for the bank. It was a sum of 1.1 billion dollars that the bank had to pay as a punishment

Deutsche Bank

This bank had to pay a penalty of 2.5 billion dollars as a result of breaching AML compliance regulations. Accompanying all these aspects, it was also found that from 2013 to 17, there were five core areas identified in the financial crime category. In those five high alert areas of financial fraud, AML accounted for 3.5 billion dollars. Not only this, financial crimes were ranked as the second most committed crimes by the global enforcement and regulatory bodies.

Requirements for AML/ KYC Checks

AML/KYC checks include identity verification of individuals. It can take various forms depending on. The nature of the business and the type of transaction taking place. Sometimes the verification process can take the form of Enhanced due diligence if the concerned entity is subjected to high risk. Also, it may need to run a background check on the individual to identify if he appears to be a Politically Exposed Person or not. An in-depth investigation may involve a lookup into that individual’s large cash transactions, transactions that are subjected to jurisdictions, unexplained or suspicious transactions, or those involving suspicious business entities.

Final Thoughts

AML compliance is not just restricted to procedural requirements to avoid fraud and scams. It is now necessary to raise awareness regarding the dreadful realities that have resulted due to the violation of AML laws as discussed above. AML Checks need to be implemented with more cautiousness and vigilance to avoid such incidents to occur in the future. People involved in money laundering activities will only fear fraud when they will know what consequences can occur as a result. Thus, along with certain verifications, it is required to promote punishments. In order to demote the intentional breach of AML regulations. ID verification along with the imposition of fines is likely to reduce money laundering practices and prevent those people from doing so, who think it.  

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