Anti-Money Laundering (AML): Money laundering is the practice of disguising dirty money (i.e., money obtained by illegal means like selling drugs, selling arms illegally, terrorism, etc) as legitimate income.
Today, banks and financial industry firms use stringent Anti Money Laundering (AML) defense mechanisms to prevent such illicit incomes.
Over the years, BFSI firms have taken measures, from stringent compliances/protocols to the inclusion of contactless biometrics technologies for preventing AML activities.
The impact of money laundering falls heavy on banks. Today, we are going to uncover such aspects in our blog.
Table of Contents
3 Importance of AML in Banking?
1. Avoiding Fines/Penalties and Adhering to Regulatory Compliance
Banking, Financial Services, and Insurance (BFSI) Organizations face heavy fines for not complying with Anti-Money Laundering regulations set by the government. According to a source, more than $403 billion has been levied on the financial service industry organizations for KYC (Know Your Customer) and AML violations.
Today, top-tier financial institutions spend $1 billion annually to avoid crimes. Moreover, it is not limited to fines. For example, if money laundering gets detected in an organization, any employee found guilty can be sent to jail.
2. Boosting the Confidence of the Existing Users
AML protocols assure the end users that adequate measures are being taken to ensure that no illicit activities happen through the bank accounts.
The practices revamp user experience and relieve the onboarded user of the fact that anyone breaching the norms would get flagged and removed as an account holder in the bank.
Moreover, it even improves their confidence in the bank or financial institution, as they know that the firm is adhering to government guidelines.
In addition, the digital anti-money laundering checks enhance the retention of the onboarded users on the banking platform or app and make them think twice before switching to another brand.
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3. Prevent Damage to the Organization’s Reputation & More
Banks and other financial institutions can become victims of terrorism financing, corruption, and other illicit activities if they don’t adhere to AML protocols, a part of the Customer Due Diligence (CDD).
It can lead to irreversible reputation damage and irrecoverable financial crisis. As a result, this can further lead to loss of trust and divert existing users to competitors.
On the other hand, organizations don’t become victims of AML non-compliance, especially in the banking industry, can retain their customers for long, create a good brand image, boost revenue, and focus more on business aspirations.
Moreover, they can identify individuals involved in illicit financial transactions and report them to safeguard the enterprise against further damage.
Conclusion
Anti-money laundering is essential to banking and financial institutions. It is relevant not only for safeguarding the bank from becoming a victim of illicit activities and suffering the consequences of a bad reputation but also for assuring the account holders.
The AML protocols are set for revoking any money laundering attempts, which significantly boosts the confidence of existing and targeted users. Removing this practice from the system could prove detrimental to the BFSI firms.
Biocube’s BioKYC solution incorporates AML, PEP, and sanction checks. It is also a contactless biometric solution that revamps the user experience from onboarding to offboarding.
It can help BFSI firms search for an end-to-end solution to revamp security and comply with government compliances. Get in touch with us today to learn more about the benefits of our solution to your enterprise.