Category: AML

Navigating the twists and turns of global financial regulations in 2024, the demand for robust Anti-Money Laundering (AML) technology is more critical than ever. It’s no longer just about compliance; it’s about safeguarding your operations from the sophisticated tactics of financial fraud and laundering. 

This guide spotlights the top 8 AML solutions of 2024, with a special focus on how DIRO is transforming the landscape with real-time, global verification and seamless integration.

AML tools are more than just software; they act as vigilant sentinels, protecting your financial institution from money laundering and ensuring your operations remain clean and compliant. Get the full scoop with our in-depth blog post.

8 Top AML Solution Providers of 2024

Exploring the latest in AML software is like walking through a high-tech showcase built for the finance world—loaded with cutting-edge features designed to streamline compliance.

Here’s a breakdown of the top picks making waves in 2024:

1. DIRO

Leading the pack, DIRO is redefining AML and KYC processes by offering real-time verification for bank accounts, identities, government data, and documents. With global coverage in 195 countries, DIRO is setting new standards for speed and accuracy.

• Cost: Flexible pricing based on your business needs.
• Ease of Use: Easy to integrate with same-day onboarding.

Features:

• Real-time verification
• Instant bank account authentication
• Online document verification

Pros:

• Global coverage
• Instant verification
• Seamless integration
• Available in 195+ countries

Cons:

• Some may require more detailed customization options upfront.

What Sets DIRO Apart from the Competition?

	DIRO	Other Solutions
Verification	Real-time, any country, any bank	Often struggle to bypass regional barriers
Coverage	195+ countries	150-200 countries
Ease of Integration	Same-day onboarding	Weeks to months
Documents covered for AML/KYC	Bank, utility, credit, government documents	Limited documents
Authentication	Direct from official sources	Less extensive data verification methods

2. Trulioo

Trulioo provides comprehensive KYC and AML checks across industries, leveraging an international database for real-time verifications.

• Features: Access to global data for quick verification.
• Cost: Versatile pricing, including pay-as-you-go.
• Ease of Use: User-friendly but may need a bit of technical integration effort.
• Pros: Covers various sectors and regions.
• Cons: Requires tech support for optimal integration.

3. Refinitiv

Refinitiv offers AML and risk management solutions, supported by extensive market intelligence.

• Features: Risk intelligence, due diligence reports.
• Cost: Customized based on services.
• Ease of Use: Ideal for users familiar with financial analytics.
• Pros: Deep data sources, thorough checks.
• Cons: High cost for smaller operations.

4. Sanction Scanner

Sanction Scanner focuses on real-time AML screening and monitoring, improving compliance workflows.

• Features: Instant screening, adjustable risk parameters.
• Cost: Subscription-based.
• Ease of Use: Intuitive, with a simple dashboard.
• Pros: Immediate alerts, and wide database access.
• Cons: Limited database reach compared to some competitors.

5. Nice Actimize

Nice Actimize provides a comprehensive suite for managing financial crime risks, from fraud detection to AML.

• Features: Advanced analytics, surveillance.
• Cost: Custom pricing.
• Ease of Use: Designed for users with a technical background.
• Pros: Robust analytics, wide feature set.
• Cons: High resource demands for full implementation.

6. ComplyCube

ComplyCube offers a cloud-based AML solution that is scalable for businesses of any size.

• Features: Real-time AML checks, and ID verification.
• Cost: Flexible, with pay-as-you-go options.
• Ease of Use: Simple platform with a quick setup.
• Pros: Responsive customer support, scalable.
• Cons: Still emerging in the market.

7. SAS Anti-Money Laundering

SAS brings its analytics expertise to AML, offering tools for customer due diligence and risk scoring.

• Features: Advanced analytics, profiling.
• Cost: Tailored pricing.
• Ease of Use: Requires analytical skills.
• Pros: Customizable, in-depth tools.
• Cons: Steep learning curve.

8. DueDil

DueDil emphasizes real-time business intelligence, integrating extensive company data for AML and KYC checks.

• Features: Risk monitoring, and instant data access.
• Cost: Subscription or custom pricing.
• Ease of Use: API-focused, requiring technical integration.
• Pros: Fast access to data, and smooth integration.
• Cons: Suited to users comfortable with API tools.

AML Technologies: From Manual to AI-Driven

Today’s AML tech is leveraging AI, machine learning, and blockchain to stay ahead of evolving money laundering tactics. These tools have shifted from simple box-ticking exercises to sophisticated systems that are essential in combating financial crime.

How to Choose the Right AML Solution?

Selecting the right AML software depends on how well it integrates with your systems, regulatory capabilities, and scalability. The ideal solution will meet compliance needs while adapting to your business growth and defending against financial crime.

AML in Action

AML systems monitor transactions, conduct due diligence, and screen sanctions in real-time, using advanced analytics to detect and halt suspicious activities.

Why DIRO Leads the Pack?

DIRO’s real-time verification and global reach make it the leader in AML and KYC, providing businesses with the speed, accuracy, and scalability they need to stay ahead of financial crimes.

Conclusion

The right AML solution is essential for compliance and operational security. With DIRO leading the charge, offering unparalleled real-time verification and global coverage, your business can stay compliant, secure, and ready to combat financial threats.

Anti-money laundering methods are becoming a part of almost every country’s financial guidelines. Governments have highlighted rules and regulations on how companies must approach AML efforts. 

AML is crucial for businesses to prevent financial fraud. An important part of AML regulation is “AML Screening”.

In this guide, we’ll be breaking down what are AML screening and its importance for businesses.

Breaking Down AML Screening

AML Screening, also known as customer screening is the process of reviewing customers before allowing them to interact with a business. AML screening impacts financial institutions the most. AML Screening helps businesses fight against:

• Terrorist financing
• Money laundering
• Funding of other illegal activities

What’s the Need for AML Screening?

When it comes to anti-money laundering, screening is one of the critical components. AML screening ensures customers are who they claim to be. It’s necessary for 2 reasons. 

First off, it’s necessary because almost all government bodies demand it. Secondly, some AML initiatives need financial institutions to communicate with one another through a database. AML screening helps in reducing the risk of fraudulent activities. 

Secondly, AML screening can help companies keep themselves and their customers safe. Not only businesses are required to do so, but it also helps protect a company’s assets.

Problems with AML Screening

As more and more companies have started investing in AML screening, they’re facing a couple of challenges. First and foremost, one of the challenges that businesses face is the increased customer onboarding time. Companies have to screen customers in “real-time”.

Unfortunately, companies that are focusing on AML directives are finding it tough to screen customers in real-time. The onboarding and screening process slows down as there are limited ways to verify customers in real-time.

Moreover, a lot of companies struggle with “over-screening.” Why? Because the systems are more than often outdated and they require information that isn’t for the screening process. The worst part about this is the slowdown happens because of verifying information that isn’t relevant to the AML process.

Another challenge with the screening process is that there are risks of errors in handling and verifying information. A lot of companies have a manual document verification process that isn’t foolproof. There’s no point in AML screening if the verification of information isn’t accurate.

How to Update AML Screening Methods?

Regardless of the fact it’s a government requirement, or a personal choice, keeping up to date with AML screening methods is crucial. Modern technology is often equipped to meet the needs of today’s customers. 

Latest customer verification, document verification, and AML screening methods rely on AI and algorithms to ensure accuracy. By using solutions like DIRO online document verification, companies can trust that the information they’re getting is accurate. This helps in cutting down time during onboarding and prevents the risk of financial fraud.

As AML screening systems are automated, they can help verify customer information in real-time. With the right combination of tools, companies can do away with manual verification methods altogether.

Bitcoin, the world’s first decentralized digital currency, has gained immense popularity since its inception in 2009. Initially hailed as a revolutionary alternative to traditional currencies, Bitcoin’s anonymity and decentralized nature have also made it an attractive tool for illicit activities, including money laundering.

Introduction to Bitcoin

Bitcoin operates on a peer-to-peer network, utilizing blockchain technology to facilitate secure transactions without the need for intermediaries like banks. Its decentralized nature and cryptographic security have led to widespread adoption, with millions of users globally.

Understanding Money Laundering

Money laundering is the process of concealing the origins of illegally obtained money, typically by transferring it through a complex sequence of banking or commercial transactions. The primary goal is to make the funds appear legitimate.

Bitcoin’s Role in Money Laundering

Bitcoin offers a level of anonymity and pseudonymity unmatched by traditional financial systems. Transactions are recorded on a public ledger, but the identities of the parties involved remain largely anonymous. This anonymity makes it challenging for law enforcement agencies to track illicit activities.

Dark Web and Bitcoin

The dark web, a hidden part of the internet accessible only through specialized software, has become synonymous with illegal activities such as drug trafficking, weapons sales, and money laundering. Bitcoin is the preferred currency for transactions on the dark web due to its anonymity and ease of use.

Challenges in Regulating Bitcoin

Unlike traditional currencies, Bitcoin operates outside the control of central banks or governments. This lack of centralized authority poses significant challenges for regulators seeking to combat money laundering and other illicit activities. Additionally, the pseudonymous nature of Bitcoin addresses makes it difficult to trace transactions back to their origin.

Addressing Money Laundering Risks

To mitigate the risks of Bitcoin-related money laundering, various blockchain analysis tools have been developed to trace transactions and identify suspicious activity. 

Additionally, regulatory measures, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, are being implemented by cryptocurrency exchanges and financial institutions.

Real-world Cases of Bitcoin Money Laundering

Several high-profile cases have highlighted the use of Bitcoin for money laundering purposes. For example, the Silk Road, an online marketplace notorious for selling illegal drugs and other contraband, relied heavily on Bitcoin transactions to facilitate its operations.

Impact on Financial Systems

The rise of Bitcoin and other cryptocurrencies has raised concerns among traditional financial institutions and regulators. The decentralized nature of Bitcoin challenges the existing regulatory framework, prompting efforts to integrate blockchain technology into mainstream financial systems.

Future Outlook

As Bitcoin continues to evolve, regulators are working to adapt their strategies to address the unique challenges posed by cryptocurrency-based money laundering. Innovations in blockchain analysis and regulatory frameworks offer hope for combating illicit activities while preserving the benefits of digital currencies.

UNDERSTANDING BITCOIN AND ITS APPEAL TO MONEY LAUNDERERS

Bitcoin is a decentralized digital currency that allows for peer-to-peer transactions without the need for intermediaries such as banks. 

Its features—anonymity, borderless nature, and the difficulty of tracing transactions—make it attractive for money laundering.

Key Features Attracting Money Launderers

1. Anonymity: While Bitcoin transactions are recorded on a public ledger (the blockchain), the identities of the participants are masked behind cryptographic addresses.

2. Ease of Transfer: Bitcoin can be transferred globally without the need for regulatory oversight, making it ideal for moving funds across borders.

3. Liquidity: Bitcoin can be easily converted into fiat currencies through exchanges, providing liquidity to laundered funds.

Step-by-Step Process of Bitcoin Money Laundering

1. Placement: Introducing Illicit Funds into the System

• Cash-to-Bitcoin Conversions: Criminals purchase Bitcoin using illicit cash through peer-to-peer platforms or Bitcoin ATMs. These methods often require minimal identity verification.
• Structured Transactions: Breaking down large sums into smaller amounts to avoid detection, then purchasing Bitcoin.

2. Layering: Disguising the Origin of Funds

• Mixers/Tumblers: These platforms mix a user’s Bitcoin with others, making it difficult to trace the origin. Tumblers take a fee and return “clean” Bitcoin to the user.
• Chain Hopping: Converting Bitcoin into other cryptocurrencies (e.g., Monero, Zcash) known for enhanced privacy features, then back to Bitcoin or another cryptocurrency.
• Multiple Wallets: Transferring Bitcoin through a series of wallets to create a complex trail that obfuscates the source.

3. Integration: Reintroducing Laundered Funds into the Economy

• Conversion to Fiat: Selling Bitcoin on exchanges to convert it back into fiat currency, then depositing it into bank accounts.
• Investment in Assets: Using laundered Bitcoin to purchase high-value items like real estate, luxury cars, or art, which can later be sold for clean money.
• Online Gambling: Using Bitcoin to gamble online and then cashing out the winnings, which appear as legitimate earnings.

Tools and Techniques in Bitcoin Money Laundering

• Mixing Services (Tumblers)

Tumblers break the link between the sender and receiver by pooling bitcoins from multiple users and redistributing them in random amounts.

• Privacy Coins

Cryptocurrencies like Monero, Zcash, and Dash offer enhanced privacy features that hide transaction details, making them popular in the laundering process.

• Decentralized Exchanges (DEXs)

These platforms allow for cryptocurrency trading without the need for intermediaries, reducing the likelihood of identity verification and increasing anonymity.

• Peer-to-Peer (P2P) Platforms

P2P exchanges connect buyers and sellers directly, often with minimal regulatory oversight, making it easier to convert illicit funds into Bitcoin.

Challenges in Combatting Bitcoin Money Laundering

1. Regulatory Gaps

The decentralized and international nature of cryptocurrencies makes it difficult for regulators to enforce anti-money laundering (AML) laws uniformly.

2. Technological Sophistication

Criminals continually develop new techniques to stay ahead of law enforcement, such as using advanced encryption and leveraging new blockchain technologies.

3. Jurisdictional Issues

Different countries have varying levels of regulation and enforcement, allowing criminals to exploit these disparities.

Regulatory and Technological Countermeasures

1. Know Your Customer (KYC) Policies

Many exchanges now require KYC verification to link identities with transactions, making it harder for criminals to operate anonymously.

2. Blockchain Analytics

Firms specializing in blockchain forensics track and analyze transaction patterns to identify suspicious activities and link addresses to real-world identities.

3. International Cooperation

Governments and regulatory bodies are increasingly collaborating to share information and develop unified approaches to tackle cryptocurrency-based money laundering.

Frequently Asked Questions

Conclusion

While Bitcoin offers significant benefits for legitimate transactions, its very nature opens up opportunities for money laundering. Understanding the methods and tools used by criminals can help regulators and law enforcement agencies devise more effective strategies to combat these illicit activities. 

As technology and regulations evolve, the ongoing challenge will be to balance the benefits of cryptocurrency innovation with the need to prevent its misuse for money laundering.

The AML landscape is evolving continuously, so fraudsters come up with new ways to launder money. One of these new and unique ways to exploit the financial systems and launder money is cross-border trade.

Trade-based money laundering is becoming an issue. To prevent trade-based money laundering, new steps are being taken.

In this guide, we’ll dive into trade-based money laundering, and how it works.

What is Trade-Based Money Laundering?

Trade-based money laundering is when a fraudster moves illegal funds through the international trade system to clean them. TBML practices often include:

• Falsification of original price.
• Quantity and quality of the imported/exported goods.

TBML takes advantage of the complicated system of the trade system. Especially the international trade system where multiple parties and jurisdictions are involved. Multiple jurisdictions mean overlapping KYC, AML, and CDD rules and regulations.

TBML is slowly becoming a major concern for governing bodies around the world. It rose to its peak during the COVID era when supply chains and the regulatory landscape were disturbed. 

Since then, several global firms have embedded supply chain risk management into their AML programs. Over 45% of global businesses claim that they’re focusing on improving the management of supply chain risks in 2023 and beyond.

How Does Trade-Based Money Laundering Work?

Fraudsters use trade-based money laundering in a number of ways, but the most common ones include:

• Over-invoicing – The exporter submits an invoice that’s overpriced to the importer, generating a payment that exceeds the value of the goods shipped. Importers often transfer the stated amount on the invoice instead of checking for the real value. 
• Under-invoicing – The exporter sometimes submits an invoice that has less value than the products. They ship the goods with greater value and then transfer that value to the importer.
• Multi-invoice – The exporter sends an invoice to the importer multiple times for the same product/shipment. The exporter then transfers greater value from the importer to the exporter. 
• Over-or under-shipment – The exporter ships more goods than they previously agreed on. They end up transferring greater value to the importer. Or, the exporter ships fewer goods than agreed on. The importer often pays the original amount without checking the goods.
• Misrepresenting the Quality – Goods shipped to the importers are purposefully misrepresented as being of higher quality. The importer pays for the high-quality goods but receives cheaper quality.

Examples of Trade-Based Money Laundering

There are some examples of trade-based money laundering that every business should be aware of. Prevention can only happen when businesses are aware of the latest trends.

Here are the biggest examples of trade-based money laundering:

• A letter of credit for a high-value cross-border import is highlighted to have anomalies when it is examined by the routing bank. When the bank investigates deeper, it reveals missing and unrecognized documentation with the import agents. The bank then rejects the transaction and returns the drawing documents.
• The first beneficiary of a multi-million dollar letter of credit has to supply medical goods for another country’s Bureau of Health. However, the second and ultimate beneficiary of the credit issues invoices that don’t match those submitted by the first. It’s shown that the first beneficiary has the invoices marked up by 300% and is additionally revealed to have a connection with the firm acting as the agent to the Bureau of Health.
• Several shell companies purchase electronics with funds derived from criminal activities and later sell the goods to buyers in high-risk countries that don’t have any due diligence. The shell companies receive the money. The banks that handle the transactions notice a number of red flags. The biggest red flag is that the companies are registered in high-risk countries.

Steps to Identify Trade-Based Money Laundering

Businesses may have an easier time spotting TBML activity if they’re familiar with the methodologies associated with it.

Here are the indicators of TBML:

• Unusually complicated or illogical corporate structures, such as the use of shell companies or companies registered in high-risk countries. 
• Trading entities registered at mass registration addresses with no reference to any specific unit.
• Trading businesses that have addresses that don’t reflect the businesses in which they’re engaged. 
• Missing, counterfeit, or fake trade documents. 
• Trading businesses that don’t have an online presence or that have an online presence that doesn’t match their business’s stated services. 
• Trading activities that don’t reflect a stated line of business, for example, car dealers trading in textiles or precious metals. 
• Payments for imports that aren’t made by parties other than the account holder.
• Trading entities that purposefully complicate the use of financial products.
• Inconsistencies or discrepancies across trade documents such as contracts and invoices. 
• Trade documents with values that aren’t consistent with market values or other comparable transactions. 
• Trading entities that make very late changes to payment arrangements. 
• Frequent cash deposits are just under the reporting thresholds.

How to Prevent and Detect TBML?

Since TBML can involve multiple parties and jurisdictions, and some of the schemes are very complicated to detect. To mitigate the risk of TBML, compliance teams need to have an understanding of business-wide risk assessments to determine their risk exposure.

Here’s how to prevent and detect TBML:

• Robust CDD

To uncover TBML, businesses of all kinds should implement CDD measures that use a combination of technology and expertise.

Businesses need to obtain a clear picture of all entities they do business with. To able to do that, businesses need to verify documents, ownership documents, address documents, and more. Compliance teams should ensure they have access to real-time document verification solution that helps them verify the identity of every entity they have to verify.

• Reputable Adverse Media Screening

Since adverse media can be a TBML structural risk indicator, businesses need to make sure their negative news screening solution can differentiate between true adverse media content at scale.

Money laundering is a severely growing problem, and it’s not limited to any one country. The United Nations Office on Drugs and Crime (UNODC) that money laundering figures worldwide will exceed the global 2% of global GDP ($1.7 trillion).

Eurojust Report on Money Laundering, states that cases registered regarding money laundering have doubled within the last 6 months. 

Anti-Money Laundering (AML) is a set of guidelines pertaining to financial institutions and other related industries. These guidelines are meant to prevent activities that support the financing of terrorism. Regulated businesses should not knowingly or unknowingly support these activities.

Risk-Based AML and Global Regulation

There are several anti-money laundering regulatory bodies that set up rules and regulations that local and international organizations have to follow. For companies to do business in a particular location, they have to comply with the rules and regulations set by the governing body. 

The Financial Action Task Force is the global money laundering and terrorist financing regulatory body. The FATF has the responsibility to set international standards that aim to prevent illegal activities and the harm they cause to society. 

FATF works with several governments and national regulatory bodies to achieve regulatory reforms. Regulations made by FATF cover more than 200 countries and jurisdictions. 

The UK was the first one to propose a risk-based assessment for anti-money laundering. It was further adopted and improved by the FATS in 2012. this led to the development of proactive risk management.

Common AML Risk Factors

A proactive risk-based approach to AML can only be done when there is an accurate risk assessment. And there are 3 distinct areas of risk that regulated industries need to focus on during risk assessment.

1. Individual Risks

Governments need to collect and maintain lists of high-risk individuals. These lists include known fraudsters, money launderers, terrorists, and red-flagged Politically Exposed Persons (PEPs). 

These individuals are considered high-risk individuals because of their influence and access to a large number of funds. During customer onboarding, businesses need to identify high-risk individuals as it’s a KYC requirement. 

2. Location Based Risks

Governing bodies also compile assessments of risk that comes with geographical jurisdictions,  flagging unsatisfactory money laundering and terrorist financing. 

The geographical location determines the laws, regulations, technology, security, data privacy, and data accuracy of a business environment. To take a risk-based approach to AML, businesses need to take location-specific risks into consideration. 

3. Channel Risks

The way a product or service is taken to the market can also affect the risk level. Now that we’re living in an internet-based economy, sales of products and services that happen online always carry a hint of risk. Without robust KYC verification and ID verification process, there’s no way to eliminate the level of risks associated with online transactions.

How to Implement a Risk-Based Approach to AML?

Taking a risk-based approach to AML is similar to managing any other type of risk in your business. A risk-based approach to AML includes:

1. Identifying Business Risks

To be able to take a proactive approach to AML, you first need to identify the risks. A business needs to review products, services, and portfolios, that contain common AML risk factors, such as:

• Customers – How much do you know about the type of customers for your service?
• Geography – What’s the exposure of the target markets to financial crime?
• Delivery channel – By what means the product will be delivered to the customers?
• Industry – How advanced are the regulations of your business’s industry?
• Monetary Value – Does your product and service has a high monetary value?
• Regulatory Controls – If the regulations in the country are advanced enough.
• Process Controls – How well can you document and follow your processes as a business?

2. Analyzing Business Risks

Analyzing and assessing risks that a business has to face is crucial for a risk-based approach to AML. Using a table of risk factors for each product or service, a business can assign risks. Then the level of risk can be categorized as “low, medium, or high”. 

The FATF has a guide that businesses can use to show how to rank risks using a simple matrix.

3. Implement Policies that Eliminate Risks 

Once the risk assessment is complete, businesses need to make policies and implement policies that help mitigate risks. These policies should make sure that the right level of scrutiny is applied to the right type of risks. 

There should be an ideal balance between high scrutiny for high risks, and minimal friction for customers with low risks.

Technologies Involved in Anti-Money Laundering

To manage risk and maintain the risks of a business, there needs to be a solution that can cover every part of the business. There are a lot of AML technologies out there that can automate the risk-assessment process for new customers, and new transactions within seconds. 

Technologies involved in anti-money laundering can be broken down into two categories:

1. Know Your Customer

Know Your Customer (KYC) is the combination of customer due diligence and enhanced due diligence that regulated organizations comply with to make sure their customers are real people and not someone posing as someone else. If there’s a customer that poses a level of risk needs, to be monitored throughout the relationship with the business. 

In an economy that’s moving towards digital solutions, new solutions that cater to online ID verification, and ID proofing are always coming up. These technologies can help businesses identify whether a customer is a genuine person or a criminal with stolen ID data.

2. Transaction Monitoring

The process of monitoring a customer’s transactions, be they small or big is known as transaction monitoring. Transaction monitoring techs are designed to eliminate the risk of money laundering. These techs can monitor digital transactions across all business channels and look for suspicious behavior.

The cost of these solutions to the business is the only consideration businesses need to have before finalizing a technology.

Frequently Asked Questions