AML, in the business world, means anti money laundering. The term refers to specific regulations, procedures and laws that are aimed to stop criminals from hiding the funds that are illegally obtained and making them seem as if they are legitimate income.
AML law covers various different criminal behaviors and transactions and was drafted in order to stop numerous illegal activities. Unfortunately, it is difficult to stop absolutely all attempts to launder money. Fortunately, there are fewer cases of illegal activities as the law becomes better and better.
How Does AML Work?
AML regulations and laws target countless criminal activities like corruption of the public funds, illegal goods trading, market manipulation and tax evasion, together with methods utilized to conceal crimes and obtained money.
The criminals try to launder money gained through illegal acts. The best example of an illegal act is drug trafficking. Through criminal activities, the goal is always to make it really difficult to trace back funds.
A common money laundering technique is to run cash gained from illegal activities through cash-based legitimate businesses owned by confederates or the actual criminal organization. The “legitimate” business deposits money and criminals make withdrawals.
A money launderer can also sneak money into a foreign country in order to deposit it. Also, cash is sometimes deposited in really small increments in order to reduce the possibility of arousing suspicion. Launderers even sometimes invest cash and use the services of dishonest brokers that do not care about rules as they just want commissions.
Financial Institutions Have Obligations
Financial institutions need to monitor the deposits made by customers and all other transactions so that they can check that a money laundering scheme is not in place. All institutions need to verify the origins of large money sums, monitor all suspicious activities and when transactions are higher than a specific amount set by law ($10,000 in the US), they have to be reported. Compliance with AML law is mandatory and the clients of the financial institutions also have to be aware of the laws in place.
Money Laundering Investigations
Law enforcement agencies often carry out money laundering investigations. They commonly involve financial records being analyzed for suspicious activity and inconsistencies. The modern regulatory environment forces companies to keep extensive transaction records. This is needed for every single significant transaction.
If the police want to trace a crime, the financial institutions need to offer their support. This is only possible in the event that AML laws were respected.
In cases like larceny, embezzlement or robbery, law enforcement agencies have the possibility of returning property or funds to crime victims. As an example, in the event that money was found to have been laundered in order to cover up a case of embezzlement, the agency can normally trace everything back to victims.
AML law aims to protect people and force institutions that handle finances to do their part. Without money laundering laws and procedures to protect people, those that are rich would simply become richer. Also, criminals would be able to easily hide the source of their income.