Companies should never underestimate the importance of compliance. Compliance ensures that all entities and businesses adhere to regulations to prevent money laundering. Money laundering is the process of the illegal movement of money to hide its illegal origin. The compliance professionals at GCS Malta discuss the importance of anti-money laundering (AML) compliance in this article.
What is AML compliance?
AML compliance is carrying out background checks and ongoing monitoring of customers to identify and eliminate any money laundering efforts. In fact, it is mandatory for several industries to carry out AML screening. Typically, compliance officers check sanctions, PEPs lists, and global watchlists to check for any red flags.
What is classified as money laundering?
For the offence of money laundering to exist, there must be underlying criminal activity. Under Maltese law, the laundering of the proceeds of any illegal activity is classified as a crime under the Prevention of Money Laundering Act. The proceeds of that criminal activity must be:
- knowingly acquired or used
- knowingly retained without reasonable excuse
- knowingly converted, transferred, concealed, and disguised to avoid prosecution
In addition, any attempt to carry out the above is also considered money laundering. Typically, money laundering accompanies other illegal activities such as embezzlement, bribery, tax evasion, smuggling, etc.
What are AML regulations and money laundering risks?
AML regulations are the rules businesses, and countries need to follow to prevent and eliminate money laundering and terrorist financing. Although every country follows its own laws, most countries follow the 40 recommendations of the Financial Action Task Force (FATF). For example, compliance officers in Malta follow the FATF’s recommendations to control money laundering and prevent funding terrorism.
The FATF defines money laundering risks through the combination of the following factors:
- Threats – a person, object, or activity with the potential to cause harm
- Vulnerabilities – aspects that can be exploited by the threat or that may support or facilitate its activities
- Consequences – the impact or harm caused, amongst others, on the financial institutions and systems.
Why is AML compliance important?
In one year, it is estimated that $800 billion to $2 trillion or 2%-5% of global GDP is money laundered globally. Every company and entity is responsible for preventing money laundering, and although laws are becoming stricter, AML compliance is also beneficial to your business. Here are some benefits of having an AML compliance program:
- Avoid civil and criminal penalties – by complying with regulations, you are directly preventing receiving penalties caused due to noncompliance or negligence
- Reduces financial costs – Not complying with regulations can lead to penalties, fines, loss of credit rating, and even temporary/permanent business closure. By having an AML compliance program, you are essentially preventing monetary loss.
- Increases client value – Clients are more likely to trust you when you have an excellent AML reputation as they trust your brand’s image of preventing money laundering and any other criminal activity.
Why GCS Malta?
At GCS Malta, our compliance experts ensure that your business complies with all statutory obligations under Maltese law. Contact us today for more information on how we can help you reach your business goals.
