FAQS
What are the 5 pillars of AML?
The 5 Pillars of Anti-Money Laundering (AML) are:
- Risk-Based Customer Due Diligence (CDD) – Identifying and verifying customers.
- Internal Policies & Controls – Implementing procedures to detect and prevent money laundering.
- Ongoing Monitoring & Reporting – Continuous tracking of transactions for suspicious activity.
- Independent Audits – Regular audits to ensure compliance with AML laws.
- AML Compliance Officer – A designated person responsible for enforcing AML policies.
What are the 5 main indicators of money laundering?
Common red flags of money laundering include:
- Unusual large cash deposits – Frequent or high-value cash transactions.
- Layered transactions – Moving money between multiple accounts to obscure its origin.
- Third-party transactions – Payments or deposits from unknown or unrelated parties.
- Lack of business justification – Transactions that don’t match a customer’s profile.
- Structuring or smurfing – Breaking large transactions into smaller ones to avoid detection.
What are the basic requirements for AML?
Conduct Customer Due Diligence (CDD) and Know Your Customer (KYC) checks.
Monitor transactions and report suspicious activities (SARs).
Maintain AML compliance programs with policies and training.
Follow regulations like The Money Laundering Regulations 2017 (UK).
What are the 3 stages of anti-money laundering?
- Placement – Introducing illicit money into the financial system (e.g., depositing large cash sums).
- Layering – Moving money through complex transactions to hide its origin.
- Integration – Converting illicit funds into legitimate assets (e.g., real estate, businesses).
What is the limit of AML cash?
- In the UK, cash transactions over €10,000 (or equivalent) must be reported under AML laws.
- Businesses handling large cash transactions must register with HMRC under AML regulations.
Which is a red flag for money laundering?
Red flags include:
- Large, unexplained cash transactions.
- Transactions inconsistent with customer profiles.
- Funds transferred to high-risk jurisdictions.
- Rapid movement of funds between multiple accounts.
How to identify AML transactions?
- Financial institutions use:
Transaction monitoring software – Detects unusual patterns.
KYC (Know Your Customer) checks – Verifies customer legitimacy.
Suspicious Activity Reports (SARs) – Reported to authorities like the National Crime Agency (NCA).
What are the three types of risk in KYC?
- Customer Risk – Risk from the client’s profile (e.g., politically exposed persons or high-risk individuals).
- Geographic Risk – Transactions linked to high-risk countries or tax havens.
- Product/Service Risk – Use of complex financial instruments to obscure money origins.
Are AML checks a legal requirement?
Yes, AML checks are legally required for financial institutions, estate agents, and high-value businesses. Failure to comply can lead to heavy fines or criminal charges.
How to prove source of funds?
To verify the source of funds, provide:
Payslips or employment contracts (for salary-based income).
Bank statements showing regular transactions.
Sale agreements (for property or asset sales).
Inheritance documents (for inherited wealth).
Tax returns for business income or investments.