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Good practices to prevent money laundering

written by Juan Pablo Calle, On May 06, 2020


These are some of the good practices used by financial entities to prevent the risk of money laundering and terrorism financing.

Controls to prevent and detect money laundering and terrorism financing are becoming increasingly stronger. This is clearly a global problem that is not restricted to a specific geographical area or industry.

Organizations have a number of strategies they can implement to comply with regulations and make risk management more effective. Here are some of them.

Use techniques such as Know Your Customer

Gathering information about the customer, his/her identity, profession, source of income, type of activity and the countries in which he/she does business is a good practice for preventing the risks of money laundering and terrorism financing (ML/TF).

Organizations can use several techniques to do this in the best way, including social media analysis, databases, news and transaction history.

Have information systems

Banks can verify unusual customer transactions with relative ease. However, to do so effectively, the transaction history must be compared in order to issue warning signals indicating abnormal customer behavior.

The more data available, the easier it will be to segment and profile users. This activity should not be performed by one person or a group of people, as it would take too long. In this sense, risk management software is very useful to make the task less complex and faster.

Investigate and report

A system to detect warning signals is essential, but it is also necessary to report them to the authorities when necessary. Compliance areas must receive ongoing training not only to analyze data, but also to escalate money laundering and terrorism financing events to the relevant unit and the authorities.

Establish anti-money laundering and counter-terrorism financing policies

Having a risk culture within the organization depends on a plan and policy to manage risk. Implementing controls is difficult, so organizations must have clear and specific criteria and regulations in place that are communicated throughout the company. So remember to have a handbook on good practices for preventing money laundering and terrorist financing. This way, your employees will be able to consult it to know which tools to use, how to act and how to manage risk.

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