AML regulated industries | Anti-Money Laundering

Don't get caught out by regulators - learn all about the updated AML laws that apply to the regulated financial and non-financial industries—an overview of the current requirements.

Do you offer goods or services subject to Anti-Money Laundering (AML) regulations? Knowing which industries must comply with AML requirements and understanding your obligations is essential in protecting yourself from legal and financial liabilities.

Financial institutions and other businesses must abide by Anti-Money Laundering (AML) laws to protect the economy and financial system from criminal activities such as money laundering, fraud, and terrorism financing. Accordingly, financial institutions like banks, insurers, and securities dealers should stay up-to-date with AML laws. Moreover, these laws are regularly updated to reflect current threats and risks, so industries across various verticals must be aware of their obligations to comply or risk serious penalties.

Art & Antiquities

Art and antiquities represent a higher-risk activity, with money laundering as both a motivator of transactions and a threat to the security of cultural heritage. As such, Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT) requirements require additional protections. Companies engaging in high-value art and antiquities must ensure that all buyers' identities have been verified against internationally accepted criteria, the source of wealth is established for every purchase made, and any suspicious activity is reported to law enforcement.

Gems & Jewelry

All gems and jewelry trading entities must comply with relevant Anti-Money Laundering (AML) regulations. To help fulfill obligations under AML-CFT legislation, traders should perform due diligence assessments such as identity verification and review of customer source of funds documents. They must also collect sufficient evidence before establishing multiple or ongoing business relationships with a client. Lastly, obligated businesses should keep comprehensive records of all transactions and customers for at least five years from completion.

Real Estate

Those operating within the real estate sector must also meet AML regulations. Provisions for the sector vary from country to country. Still, they typically require you to complete due diligence on customers trading in high-value real estate assets or those investors from politically exposed persons (PEPs). To meet the requirements of these regulations, businesses should create a system for monitoring and record-keeping duties to track suspicious transactions and ensure compliance with applicable laws.

Fintech

Financial technology (FinTech) companies have seen a spike in popularity in recent years. As such, they also come under extra scrutiny from the regulators. As a result, Fintech companies need to ensure that their operations comply with Anti-Money Laundering laws and other regulations. Furthermore, they must adopt appropriate customer due diligence measures and undertake sufficient risk assessments to identify potential money laundering risks. In addition, fintech may require additional licenses from the relevant regulator before operating in certain countries or regions.

Cryptocurrency

Cryptocurrency businesses are required to implement specific Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT) regimes. These regulations aim to prevent and detect money laundering activities linked to virtual assets, such as cryptocurrency and digital tokens. This will involve customer due diligence measures like identity checks, source of funds verifications, and transaction monitoring. Companies must enforce these measures for all transactions over a certain threshold or risk facing serious consequences.

Banks and Financial Institutions

Banks and financial institutions are under some of the most stringent AML requirements. As a result, these organizations must implement both customer due diligence and transaction monitoring processes to comply with AML regulations. In addition, banks and other financial institutions must have procedures in place for when there is suspicion of illegal activity and report those suspicions to the appropriate authorities. This includes having policies, procedures, and internal controls to identify unusual or suspicious activity and performing customer due diligence on new accounts.

High-Risk Gateways

High-risk gateway merchants – such as investment platforms, casinos, and foreign currency exchanges – are subject to more stringent AML-CFT regulations. These provisions require due diligence to be carried out on customers that operate in high-risk sectors. High-risk payment gateways must also create systems for continuously monitoring transactions, electronic banking services, and payment methods likely to be used in illegal activities.

Money Service Business (MSB)

Money service businesses (MSBs) must also comply with AML regulations. MSBs include currency exchange companies, check cashers, money transmitters, and sellers of prepaid access cards. These businesses must research their customers' identities, monitor transactions for possible suspicious activity and report any suspicions to the appropriate authorities. MSBs must also file Currency Transaction Reports where a single transaction trespasses the regulatory thresholds. Additionally, they are required to maintain proper records of all transactions. Failing to comply with AML regulations can result in severe civil and criminal penalties such as fines and even imprisonment. As such, MSBS must always adhere to the applicable laws.

Investment Funds and Advisers

Investment advisers, broker-dealers and firms, money managers, and custodians must also comply with AML requirements. These financial organizations must verify customer identities, retain necessary documentation, perform and log customer checks for unusual activity and observe the suspicious activities present when handling investments or brokerage accounts. Additionally, these companies must have a designated officer in place who is responsible for overseeing activities related to Anti-Money Laundering compliance. Finally, companies should properly monitor transactions coming from high-risk regions or countries.

Insurance & Brokerage

Insurance companies and brokers are typically subject to Anti-Money Laundering (AML) rules, as the purpose of many insurance policies allows individuals to use those products to conceal illicit funds. As a result, insurance companies should keep records of all customer interactions, verify customer identities using reliable sources, perform Know Your Customer (KYC) checks on individuals engaging in large transactions, and report suspicious activity. Also, the industry requires enhanced customer due diligence (CDD). This can incentivize insurers to understand the risk potential customers present better and strengthen their AML measures.

Gaming & Online Gambling

Gaming and online gambling providers are increasingly held accountable for Anti-Money Laundering (AML) compliance. Companies operating in this industry must ensure that money, and the flow of money are accounted for and traced. Gaming and online gambling providers must meet local regulatory requirements while adhering to globally accepted standards of AML regulations. The emerging landscape has led to many game providers being required to identify customers, monitor customer activity and report suspicious transactions to their respective governments.

Healthcare Sector

An important part of complying with AML laws is understanding the various regulations that apply to different types of businesses. Healthcare businesses, for instance, must abide by AML-CFT laws, which stand for Anti-Money Laundering and Countering the Financing of Terrorism. This set of regulations requires healthcare businesses (including hospitals, clinics, and medical labs) to create processes to identify suspicious activities that may be linked to money laundering or terrorism financing.

CBD Industry

The global cannabidiol (CBD) industry is also seen as being at higher risk when it comes to money laundering for several reasons. Firstly, many companies in the CBD industry are privately owned and don't have a verified legal or corporate structure. Furthermore, using cryptocurrencies such as Bitcoin is seen as another risk factor. As such, businesses in this sector are advised to be aware of the extra steps and precautions to comply with AML laws and prevent money laundering activities.

Retail & eCommerce

Suppose your business is a retailer or eCommerce trader. In that case, relevant AML regulations mandate that you must:- verify the identity of customers through reliable identification documents, perform background checks on customers or other persons associated with transactions, implement processes for ongoing customer due diligence and Beneficial Ownership verification, and establish procedures for transaction monitoring and reporting suspicious activities.

Travel & Border Security

The travel industry must follow special Anti-Money Laundering regulations to guarantee compliance with legal requirements. Some of these enhance due diligence procedures related specifically to personal information required when booking transport/travel tickets and other services, such as the name and address of the customer, the form of payment used, and the time of reservation or flight schedule.

Identifying and Mitigating Money Laundering and Terrorist Financing Risks

Understanding High-Risk Businesses and Activities

Compliance with Anti-Money Laundering (AML) regulations goes beyond identifying and reporting suspicious transactions. Properly managing high-risk business clients is essential for financial institutions to remain AML compliant, as they must assess and manage the elevated levels of risk associated with these clients.

It is essential to understand what constitutes a high-risk business client and why. High-risk businesses are susceptible to increased money laundering activities due to their nature, industry, or even the geography of their operations.

Examples include businesses operating in politically unstable countries, providers of certain services like money remitters, luxury goods sellers, casinos, etc., and political figures or organizations.

Understanding high-risk business activities will help you identify potential miscreants quickly and take proper steps to reduce risks associated with AML compliance. To know more about AML-obligated businesses, contact The Perfect Merchant, and discuss your AML compliance requirements.

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Industries Subject to AML Regulations