Technological advancement has supported the rapid development of various enterprises but it has also enabled criminals to commit crimes by using unethical techniques. Businesses worldwide have to fight various external attacks to ensure KYC & AML compliance protocols are met successfully. Unfortunately, a rise in online financial transactions has created many opportunities for criminals to win easy rewards. Anti-money laundering protocols can help corporations discourage money laundering and terrorist financing cases actively.
The following blog highlights the importance of taking AML measures and the fines that non-compliant businesses had to face.
AML Fines: Gaining Insight
Anti-money laundering penalties became severe in 2020 to discourage terrorism financing, corruption, and bribery. With technological innovation, access to financial instruments became easier than before. It created various opportunities for criminals to exploit the systems. In 2018, the fines for non-compliance were around 4 billion dollars and in 2019, financial penalties grew to around 8 billion dollars.
As per Markets & Markets report, the global AML market size will achieve a financial worth of around 5.8 billion dollars by 2027, showing a CAGR of 15.9% from 2022 to 2027.
A major growth factor behind the development of the market is the demand for infrastructure with a 360-degree view of the financial landscape. Moreover, the implementation of cloud-based AML systems will help experts fight financial crimes.
AML Compliance For Various Industries
AML protocols are necessary not only for financial firms but also for other organisations to fight fraud actively. Unfortunately, criminals exploit various organisations to launder varying amounts of money. Having said that, risk levels also differ for all businesses. The following points highlight various industries that must abide by the latest AML compliance protocols:
- Banking sector
- Financial exchanges
- Casino & gambling industry
- Real estate sector
- Currency exchanges
- Payment transfer service providers
- Investment companies
- Insurance sector
- Leasing agencies
Top 6 Reasons that Show Significance of AML Compliance
- Regulatory action:
Enforcement strategies have been on the rise with respect to AML. Since the year 2009, lawmakers have collected around 32 billion dollars in financial fines globally.
- Variety of threats:
Technological innovation has allowed criminals to use various strategies to accomplish nefarious goals. There are three broad categories of perpetrators. First are lone-wolf criminals who deal in weapons and transports through low-cost financial exchanges. Such transactions are difficult to detect. The second group is cyber-oriented fraudsters who exploit shortcomings in security protocols and technology. Such criminals achieve objectives through sophisticated systems and insider information. The third type is e-commerce criminals which massively benefited from the pandemic’s financial impact on the industry (2.4 trillion dollars). Criminals can easily pose as merchants to steal financial rewards.
- Market reputational risks:
Financial institutions rely on market reputation to maintain a competitive advantage and attract potential customers. Any type of AML crisis can leave a negative impact on a brand’s market credibility. With an increase in market volumes, the overall value also rises. In this way, firms have a lot to lose. Implementing AML compliance protocols can send a positive message of care and safety to potential clients and investors. Corporations that had to face fines and other legal penalties lost trust in customers’ minds. Cases of financial corruption have serious consequences. Hence, following AML compliance can help corporations avoid reputational risks.
- Increasing expenditures:
AML initiatives demand a lot of effort causing inefficiency and difficulties in scalability. In 2018, US financial firms spent around 23.3 billion dollars to mitigate the risk of money laundering cases.
- Poor customer experience:
The AML compliance procedure demands numerous meetings with concerned clients. Poor speed of online services and communication can negatively impact customer experience. 1 in 3 firms has lost potential customers because of outdated onboarding procedures.
- Rising cases of crimes:
Financial crimes will keep rising with time, unfortunately. Having said that, financial experts must take active steps towards fraud prevention by implementing the latest AML solutions. In the UK alone, victims lost around 80 billion dollars because of money laundering cases. Hence, the application of AML compliance measures has become more important than ever.
Concluding Remarks
Businesses all over the world must follow global AML solutions to avoid compliance failures and legal penalties. Additionally, obligated companies must perform Customer Due Diligence (CDD) regimes and KYC measures to comply with international standards.
To rephrase, anti money laundering systems are inevitable because of given regulatory obligations and flourishing businesses in a safe space. This way, experts can easily discourage illicit money flow and terrorism financing cases. Finally, the application of AML solutions is an investment with long-term advantages.
