What are AML Checks, and how do they Work?

What are AML Checks, and how do they Work?

AML Checks Meaning- What Is It?

Anti-money laundering(AML) checks are one of the methods of customer due diligence used to prevent suspicious behaviour and financial crime. The primary aim of anti-money laundering checks is to help prevent companies from directly or indirectly getting involved in criminal activity.

Regulated businesses are required to comply with money laundering regulations, and these can range from KYC to real-time screening. Organisations failing to follow these AML checks will likely face heavy fines and serious consequences.

Anti-money laundering refers to the collection of regulations, laws, and processes designed to prevent illegally obtained funds from entering the monetary system. AML regulations target a wide range of crimes, ranging from tax fraud to corruption to illegal trade and market manipulation, as well as efforts made to disguise illegally obtained funds.

Since the majority of terrorists and criminals rely on laundered money to fund their illicit operations, having adequate AML legislation and AML compliance measures can help reduce crime.

Why is AML So Important?

Research suggests that around $300 billion is laundered annually in the United States alone. Globally, criminals launder money worth between $800 million and $2 trillion every year. Money laundering is normally linked with smuggling, illegal arms, bribery, cyber fraud, and insider trading. It is also widespread in organised crime, like drug trafficking, prostitution, and human or weapons trafficking. Financial institutions must conduct AML checks regularly to prevent this loss each year.

Failing to comply with anti–money laundering checks can lead to huge losses, such as penalties and monetary loss due to dealing with money launderers. The repercussions of non-compliance can damage credit rating and cause temporary or permanent closure of the business. Lastly, having a proactive approach allows companies to make their customers feel secure by minimising room for data leakage. When a business or financial institution has a smeared reputation related to anti-money laundering, it can lose its reputation and market value.

What are the AML and KYC Checks?

AML checks involve monitoring financial transactions for suspicious activity, such as depositing large sums of cash or transferring money to high-risk countries. The main aim is to identify and report any suspicious criminal behaviour to the authorities.

On the other hand, Knowing your Customer (KYC) is the process of confirming the identity of a client or customer, typically at the start of a business deal or relationship. Having these details allows organisations to learn more about customer investment and financial profile and also enables, therefore, able to recognise and prevent any potential risks beforehand.

Wallester explains – the keys to successful KYC & AML Checks.

Difference between KYC and AML Checks.

Anti-money Laundering (AML) is a blanket term that includes a range of well-rounded measures to prevent financial crimes. KYC is a measure that can be used as part of anti-money laundering regulations to avoid illegal financial activities involving acquiring customer information and confirming their identity.

KYC falls under the canopy of AML and acts as one of the many solutions that can streamline compliance with the broader anti-money laundering framework. KYC includes risk assessment and identity verification, while AML involves a wide range of measures to minimise risks during and after KYC checks.

How KYC incorporates in AML checks?

KYC checks are normally done at the start of a business relationship. This involves gathering personal information such as the customer’s name, complete address, driver’s license, passport, and date of birth, along with facial and fingerprint verification.

AML checks are ongoing and include checking financial transactions for illegal transactions. While AML and KYC checks serve different purposes, they both work together to ensure the integrity of the financial activity.

KYC checks help businesses deal with trustworthy customers and minimise identity theft and fraud, which are normally used to enable illegal activities.

AML checks help detect and prevent illicit activities that can influence the integrity of financial institutions and the economy as a whole.

What Data Is Needed For AML Checks?

  1. Name
  2. A photo or an official document to confirm identities, such as a passport or driving license
  3. Proof of residence
  4. Date of birth
  5. Detailed employment/business records
  6. Source of income/funds
  7. Expected level and type of activity

When Must Financial Institutions Run AML Checks?

According to the Financial Action Task Force(FAFT), organisations should undertake customer due diligence measures when:

  • Setting up a new business relationship with a client
  • It suspects terrorist financing or money laundering
  • It is suspicious about previously acquired customer identification details
  • Occasional transactions occur that are more than the designated threshold of 15,000 USD/EUR

It is recommended to perform ALM checks occasionally for current customers, especially when their circumstances change. FAFT advises that a risk-based approach should decide the degree of customer due diligence. Moreover, the agency also recommends that businesses take additional measures like enhanced ongoing monitoring for certain activities and customers, such as wire transfers, politically exposed persons, and correspondent banking.

Systems That Support AML Checks

Effective transaction monitoring, transaction screening, and client screening are all systems that help support AML checks in line with the circumstances stated above. Having these systems will provide a precise understanding of the risk and, consequently, the degree of the AML checks that each client and transaction requires.

Wallester’s Technology Benefits For AML Checks?

Wallester’s cutting-edge financial solutions support AML and KYC checks and allow you to perform individual and business identification in line with the international AML compliance standards for secure registration of new users in your card program system. Its fraud monitoring services offer transaction monitoring to detect and prevent card fraud, thereby reducing the possibility of financial losses.

AML Checks Are For Reliable Protection Against Financial Crime

Implementing AML checks is the best practice if you are looking for reliable protection against financial crime. All organisations regulated by money laundering rules must have AML checks in place as part of customer due diligence.

How Can Wallester Serve You?

Wallester is a licensed financial institution that develops digital financial technology to streamline your daily business operations. Our unique selling point is the REST API created by our in-house team. We offer various solutions catered to different industries, including banks, Fintech companies, travel agencies, and business loan providers. We offer users flexible and user-friendly platforms alongside top-tier fraud protection.

Our innovative platform contains a built-in KYC verification system that optimises the customer’s identification procedure. Automatic data verification will save substantial money and time while processing information and provide reliable business protection in compliance with the current AML standards.


What is anti-money laundering (AML)?

Anti-money laundering is a set of laws, regulations, and processes primarily used in the financial, legal, and compliance industries to develop safety standards that organisations must implement to identify, avoid and report suspicion of illicit activity, including money laundering. Anti-money laundering checks seek to make it more difficult to hide profits from criminal activity and force financial institutions to develop sophisticated customer due diligence programs.

What AML Red Flags do I need to be aware of?

• The client is overtly evasive or secretive about their identity
• The client is using multiple bank accounts for no good reason
• The client is randomly changing lawyers or financial advisors multiple times in a short period
• The client is doing transactions that don’t correspond to their general business activities
• The client comes from a politically exposed background, such as a judge or politician
• The client is suddenly using virtual assets, such as crypto, without an obvious reason
• The client is on the sanctions list or has received bad media publicity
• The client is sending money to unusual geographical locations that have nothing to do with their family or professional expertise

What is Enhanced Due Diligence (EDD)?

Enhanced Due Diligence, or EDD, involves a set of high-level security measures for high-risk customers. This is when a company’s risk rating is considered above the normal threshold, requiring sophisticated scrutiny. EDD is commonly used as an extension of customer due diligence.

Who must perform AML checks?

Any business that deals with a large number of financial transactions should perform AML checks. This includes companies in both B2B and B2B industries.

What is the difference between KYC and AML?

KYC involves acquiring and confirming customer information, whereas AML is a blanket term describing different safety measures organisations and financial institutions take to prevent fraud. KYC is a part of AML and essentially helps streamline compliance within the AML framework.

Why business needs AML Checks?

Businesses require AML checks when dealing with investment or finance to confirm the legitimacy of the client wishing to invest. Doing so helps them identify and protect themselves against the risk of money laundering.

Please, improve your experience!

You’re using an unsupported web browser. As Wallester supports the latest versions, we highly recommend you use an up-to-date version of one of these browsers: