If you work in the financial technology (fintech) industry, you probably know better than anyone the risks of doing business. From volatile investments in the stock market to cybercriminals and other bad actors, the fintech world is full of dangers lurking around every corner.
One of these dangers is money laundering – the process of using banking transfers and commercial transactions to make money someone gained illegally appear “clean.” Money laundering is illegal, but that doesn’t stop it from happening every day around the globe. In fact, it’s estimated that between $800 billion and $2 trillion (as a lot as 5% of the worldwide financial system) is laundered world wide yearly!
Lawmakers and different governing our bodies have taken steps to forestall cash laundering with AML (anti-money laundering) sanctions lists. These lists can assist you retain what you are promoting secure from unlawful actions – however they’re solely helpful in the event you conduct common sanction screenings.
What’s a Sanction and a Sanctions Record?
Earlier than we are able to focus on why AML sanctions lists are so vital to FinTech firms, we should first perceive what a sanctions checklist is. A sanction is an official condemnation a regulatory physique levies in opposition to organizations or people recognized to interact in unlawful conduct. A authorities might sanction a recognized arms supplier, drug trafficker, or different fugitive in the event that they imagine the person is a hazard to society.
Cash launderers usually earn sanctions for one among two causes: both they’ve obtained their cash by criminality (thereby making them a hazard to society) or they’re making an attempt to evade taxes (making them a hazard to the federal government). Regardless of the motive, folks or firms who interact in cash laundering could be actual hassle for FinTech companies – which is why it’s smart to display screen them out earlier than coming into into any enterprise with them.
How are you aware which prospects or purchasers are potential cash launderers? You’ll be able to test an AML sanctions checklist. It is a complete checklist of any people or teams who’ve been the topic of a sanction. There are various completely different sanctions lists out there: the U.S. Workplace of International Belongings Management (OFAC) has its personal checklist, the EU has an inventory of sanctions particularly associated to EU monetary establishments, and lots of nations have their very own lists of sanctions issued by their governments.
Any of those sanction lists may enable you keep away from working with potential cash launderers in what you are promoting – however one of the best ways to guard your organization is to display screen as many lists as doable.
Why Ought to Your FinTech Firm Carry out an AML Sanction Test?
We’ll admit that performing AML sanction screenings isn’t a simple course of. There are various lists to look at, every containing a whole lot (perhaps even 1000’s) of names. Moreover, these sanctions lists are up to date each day, so a person or group might not seem on the time you conduct your screening!
However even with these obstacles in thoughts, FinTech firms ought to make AML sanction checks a compulsory a part of their enterprise operations. Listed here are a number of the explanation why this additional step is so vital:
AML sanction screening ought to be part of your organization’s buyer due diligence (CDD) process. Should you uncover that an individual or group you might need labored with has been censured for cash laundering (or some other legal exercise), you’ll seemingly keep away from working with them.
Pre-screening your prospects with AML sanctions lists can assist you keep away from turning into the sufferer of a monetary crime.
Keep away from Your Personal Sanctions
Cash laundering (as we’ve mentioned a number of occasions right here) is unlawful. People who commit this crime could be topic to a variety of repercussions, from hefty fines to jail time. However are you aware what else may end up in penalties? Working with cash launderers – even in the event you don’t realize it.
Should you fail to do your due diligence and display screen your prospects, you could be accountable for giant regulatory charges! Don’t do that to what you are promoting. Ensure you display screen your prospects!
A technique to ensure what you are promoting is secure (with out dropping valuable time conducting screenings) is to make use of a third-party service to your AML sanction screening needs. They are going to regularly overview sanction lists and report back to you any people or teams that could be dangerous for enterprise. These firms can assist you keep away from cash laundering in what you are promoting and cut back the dangers related to working with dangerous actors.
Giovanni Gallo is the Co-CEO of ComplianceLine, the place his group strives to make the world a greater office with compliance hotline companies, sanction and license monitoring, and workforce eLearning software program and companies.
Rising up because the son of a Cuban refugee in an entrepreneurial household taught Gio how servanthood and deep care for workers could make a thriving enterprise a platform for optimistic change on the earth. He constructed on that by expertise with startups and multinational organizations so ComplianceLine’s options can empower caring leaders to construct sturdy cultures for the betterment of each worker and their neighborhood.
When he’s not working, Gio’s wrangling his two younger children, driving his motorbike, and supporting schooling, households, and the homeless within the Charlotte neighborhood.