What is Anti-Money Laundering (AML) and why is it necessary?

Over the past few decades, money laundering has become an increasingly prevalent problem. Financial institutions and governments are constantly looking for new ways to fight money launderers, and several anti-money laundering policies have been put in place to accentuate this effort.

The term “anti-money laundering” specifically refers to all policies and laws that require financial institutions to proactively monitor their customers in order to prevent money laundering and corruption. These laws also require financial institutions to report any financial crimes they find and do everything possible to stop them.

Anti-money laundering laws first appeared on the world stage soon after the creation of the International Financial Action Task Force. The FATF was responsible for creating most of the anti-money laundering standards, and it established a framework for countries to follow. Following the implementation of this framework, the FATF then began to systematically identify countries that did not have adequate money laundering legislation. This tactic helped motivate countries to change their legislation and begin to properly enforce the policies that were already in place. Currently, the FATF has 37 member countries.

Since financial institutions play a central role in the world of financial crime, it is important that they receive adequate training on how to identify and deal with money laundering. Almost all bank employees receive anti-money laundering training, and all are legally required to report suspicious activity. Additionally, new anti-money laundering software is increasingly being used to help detect potential criminal activity that bank employees might not notice.

Although financial institutions are required to comply with anti-money laundering regulations, this does not necessarily mean that they agree with them. Recently, many banks have expressed their aversion to anti-money laundering policies and their belief that such policies are both costly and ineffective. Every year, in Europe and America alone, millions of dollars are used in an attempt to regulate and stop money laundering. But many are beginning to believe that the anti-money laundering systems currently in place are largely ineffective and that the amount of money we spend on them is not worth their dubious achievements.

In addition to the FATF, the United Nations Office on Drugs and Crime also works to identify and stop money laundering. This office has an informative website that provides facts and details about money laundering, as well as ways to spot and prevent it. The United Nations Office on Drugs and Crime also provides software that can be used to prevent financial crime, collect data and perform analysis.

Finally, the World Bank also provides information on money laundering on its website, along with a plethora of advice to help governments and private businesses end the money laundering epidemic.

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