Creating an Anti-Money Laundering Policy

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Money laundering is a heinous global crime that continues to pose increasingly grave threats to businesses and governments alike. Thankfully, the development of an Anti-Money Laundering (AML) policy could provide the much-needed protection: such a policy being a critical part of any business’s compliance management system, with its importance in ensuring firms don’t inadvertently assist criminal activities and endure potential financial repercussions impossible to ignore.

Here at Genie AI, we understand this problem only too well. Passionate about helping people protect themselves from money laundering risks through the use of legal documents and free template libraries, our mission is to equip anyone wishing to draft high-quality AML policies with the tools they need - all without having to pay for costly legal assistance.

The implementation of an effective AML policy is paramount for businesses undertaking financial transactions; identifying and understanding these risks being essential for firms in order for them to create efficient protocols capable of monitoring suspicious activities, as well as reporting them. It’s also important that such policies be regularly reviewed and updated so as not to fall foul of new regulations or best practices - staff training on their obligations under the policy imperative too.

It’s clear that having an effective Anti-Money Laundering policy isn’t something companies can afford to skimp on - it’s essential when it comes to protecting themselves from potential legal or financial repercussions whilst avoiding becoming complicit in money laundering activities without realising. However, we firmly believe developing such a comprehensive framework need not be difficult: by using our freely available template library alongside careful research into latest legislation and best practice advice, you’ll be able set one up with ease - keeping your business fully compliant in no time at all! So why not read on below for our step-by-step guidance; finding out more about how you can access our template library today?

Definitions (feel free to skip)

Legal Framework: The set of laws, regulations, and other legal documents that guide the activities of an organization or individual.
Regulations: Rules or guidelines that must be followed by an organization or individual.
Jurisdiction: The legal authority to make and enforce laws.
Financial Action Task Force (FATF): An intergovernmental organization that sets global standards on money laundering, terrorist financing, and other related threats to the integrity of the international financial system.
Risk Assessment: An evaluation of the potential risks posed by an activity or situation.
Customer Due Diligence: A process used to identify and assess the potential risks of money laundering posed by a customer.
Onboarding: The process of introducing a new customer to an organization.
Transaction Monitoring: The process of tracking customer transactions to detect suspicious or illegal activities.
Customer Identification: The process of verifying a customer’s identity.
Verifying Customer Information: The process of confirming that the information provided by a customer is accurate.
Reporting Suspicious Activity: The process of reporting any suspicious activities to the appropriate authorities.
Investigations: The process of gathering evidence to determine whether a crime has been committed.
Internal Reporting System: A system of procedures and processes used to report suspicious activity to the appropriate internal personnel.
Monitoring and Tracking Suspicious Transactions: The process of using automated systems to detect and flag suspicious activities.
Document Retention Policy: A policy that outlines the procedures for storing, archiving, and securely disposing of customer information.
Training and Education Program: A program used to train and educate employees on the organization’s policies and procedures.
Internal Control System: A system of procedures and processes used to ensure that the organization is in compliance with applicable regulations.
Monitoring and Auditing: The process of regularly reviewing and testing the organization’s procedures and processes to ensure they are being properly implemented.

Contents

• Understanding the legal framework and regulations surrounding anti-money laundering policies
• Performing a risk assessment to determine the level of risk of money laundering for the particular institution
• Establishing a customer due diligence program to identify high-risk customers and transactions
• Establishing procedures for customer identification
• Verifying customer information
• Monitoring customer transactions
• Establishing procedures for reporting suspicious activity and performing investigations
• Establishing an internal reporting system
• Establishing a system for monitoring and tracking suspicious transactions
• Establishing a process for investigating suspicious activity
• Establishing a customer identification program to verify the identity of customers
• Establishing an internal control system to ensure ongoing compliance with anti-money laundering regulations
• Establishing procedures for monitoring and auditing the effectiveness of the anti-money laundering program
• Establishing a system to detect possible money laundering activities
• Implementing a training and education program for employees
• Developing a document retention policy for customer information
• Developing a system to monitor and detect possible money laundering activities
• Establishing procedures for responding to potential money laundering activities
• Establishing procedures for reporting potential money laundering activities
• Establishing procedures for investigating potential money laundering activities
• Establishing procedures for taking corrective action if money laundering activities are identified

Get started

Understanding the legal framework and regulations surrounding anti-money laundering policies

• Research the local and international laws and regulations related to anti-money laundering.
• Consider which regulations apply to your institution and how they should be interpreted.
• Research any specific country or industry guidelines related to anti-money laundering.
• Gather information on enforcement trends and any recent changes in the anti-money laundering regulations.

When you can check this step off your list:

• When you have a good understanding of the current legal and regulatory framework surrounding anti-money laundering policies.

Performing a risk assessment to determine the level of risk of money laundering for the particular institution

• Identify and document the types of activities/operations that may be exposed to money laundering risks
• Assess the institution’s geographical locations and customer base to determine the level of risk
• Analyze any new products, services, and technologies that may increase the risk of money laundering
• Create a matrix that outlines the various risks and their associated threat levels
• Develop a risk mitigation plan that addresses the identified risks

You can check off this step when you have identified and documented the types of activities/operations that may be exposed to money laundering risks, assessed the institution’s geographical locations and customer base to determine the level of risk, analyzed any new products, services, and technologies that may increase the risk of money laundering, created a matrix that outlines the various risks and their associated threat levels, and developed a risk mitigation plan that addresses the identified risks.

Establishing a customer due diligence program to identify high-risk customers and transactions

• Establish a customer due diligence program to identify, monitor and assess high-risk customers and transactions
• Develop an effective system for monitoring customer activities to identify suspicious transactions
• Analyze customer information to determine the risk level of each customer and transaction
• Implement procedures for verifying customer identities
• Assign customer risk ratings based on the results of customer due diligence
• Establish internal controls for monitoring and reporting suspicious activity
• When you have established a customer due diligence program, you can check this off your list and move on to the next step.

Establishing procedures for customer identification

• Develop procedures to ensure customer identification is performed prior to any transaction being processed.
• Ensure customer identification data is collected and stored in accordance with applicable laws and regulations.
• Determine the types of documents and information needed to effectively identify customers.
• Identify the appropriate methods of verifying customer identification data.
• Establish procedures to ensure customer identification is performed in a timely manner.
• Establish procedures for handling situations when customer identification is not possible.
• Create a customer identification record for each customer.
• Establish procedures for updating customer identification records.

When you can check this off your list and move on to the next step:

• When procedures have been developed and documented for customer identification.
• When customer identification data has been collected and stored in accordance with applicable laws and regulations.
• When the types of documents and information needed to effectively identify customers have been determined.
• When appropriate methods of verifying customer identification data have been identified.
• When procedures have been established to ensure customer identification is performed in a timely manner.
• When procedures have been established for handling situations when customer identification is not possible.
• When customer identification records have been created for each customer.
• When procedures have been established for updating customer identification records.

Verifying customer information

• Collect and verify customer information, such as name, address, and phone number
• Obtain evidence of customer identity, such as a valid driver’s license, passport, or other government-issued identification
• Verify customer’s identity against databases or other public records
• Review customer information to detect any suspicious activities or patterns
• Ensure customer information is kept up-to-date

You will know you can check this off your list and move on to the next step when you have collected and verified the customer information, obtained evidence of the customer identity, verified the customer’s identity against databases or other public records, reviewed the customer information for any suspicious activities or patterns, and ensured the customer information is kept up-to-date.

Monitoring customer transactions

• Create a system that can collect and store customer data
• Monitor customer transactions and compare them to the customer profile
• Set up alerts for suspicious activity
• Review customer transactions regularly
• Document any suspicious activity and take appropriate action

Once the system is set up and customer transactions are being monitored, you can check this step off your list and move on to establishing procedures for reporting suspicious activity and performing investigations.

Establishing procedures for reporting suspicious activity and performing investigations

• Develop procedures for identifying and reporting suspicious activity
• Create a system to document, investigate, and report suspicious activity
• Clearly define the process for escalating suspicious activity reports to the appropriate authorities
• Establish protocols for keeping confidential any information regarding suspicious activity
• Determine who in the organization is responsible and authorized to investigate suspicious activity
• Finalize and document all procedures related to suspicious activity reporting and investigations
• Test the procedures to ensure that they are effective and efficient

You’ll know you’ve completed this step when you have a clear set of procedures in place for identifying and reporting suspicious activity, a system to document and investigate suspicious activity, and protocols for keeping confidential any information related to suspicious activity.

Establishing an internal reporting system

• Identify a team or individual who will be responsible for reporting suspicious activity internally
• Establish protocols and procedures for how employees should report suspicious activity
• Develop an internal reporting system so employees can easily and quickly submit reports of suspicious activity
• Establish a system for maintaining records of reported suspicious activity

Once you have identified a team or individual responsible for reporting suspicious activity, established protocols and procedures for how employees should report suspicious activity, developed an internal reporting system, and established a system for maintaining records of reported suspicious activity, you have completed the task of establishing an internal reporting system.

Establishing a system for monitoring and tracking suspicious transactions

• Set up a system that captures customer information, transaction history, and other data relevant to AML compliance
• Design the system to alert relevant personnel when suspicious transactions occur
• Identify the process for investigating flagged transactions and document it
• Train staff on how to use the monitoring and tracking system
• Test the system to ensure it is working correctly
• When the system is functioning properly and staff is adequately trained, the step is complete and you can move on to the next step.

Establishing a process for investigating suspicious activity

• Develop a standard procedure for reporting and investigating any suspicious activity
• Create a process for tracking and documenting the investigation
• Establish a timeline for completing the investigation
• Identify the roles and responsibilities of those involved in the investigation
• Establish a process for reviewing and approving the results of the investigation
• Develop a system for reporting and filing Suspicious Activity Reports (SARs)
• When you’ve completed the above points, you can check off this step and move on to the next step.

Establishing a customer identification program to verify the identity of customers

• Create and implement a customer identification program that requires customers to provide information to verify their identity.
• Develop and document a process for verifying and documenting the sources of customer identifying information.
• Establish customer due diligence processes that are risk-based and tailored to the size and complexity of the customer relationship.
• Establish processes for confirming customer identity when the customer is not physically present.
• Establish and document procedures for determining when an existing customer identification must be updated.

You’ll know you can check this step off your list when the customer identification program is in place, the process for verifying and documenting sources of customer identifying information is established and documented, customer due diligence processes are established and tailored to the size and complexity of the customer relationship, a process for confirming customer identity when the customer is not physically present is established, and procedures for determining when an existing customer identification must be updated are established and documented.

Establishing an internal control system to ensure ongoing compliance with anti-money laundering regulations

• Identify areas of risk in the company with regards to money laundering
• Develop appropriate controls and procedures to mitigate those risks
• Ensure that all relevant employees are aware of the policies and procedures
• Establish a system of internal reporting to keep up with any changes in regulations
• Implement an audit system to monitor and review the performance of the company’s anti-money laundering controls
• Set up an internal testing system to ensure that all the policies and procedures are being followed
• Educate employees on the legal requirements and the company’s anti-money laundering policies
• Monitor the effectiveness of the system and provide feedback as needed

When you can check this off your list and move on to the next step:

• When all the internal control systems and procedures are in place
• When all relevant employees are aware of the policies and procedures
• When an audit system is established to monitor and review the anti-money laundering controls
• When an internal testing system is implemented to ensure the policies and procedures are being followed
• When all employees are educated on the legal requirements and the company’s anti-money laundering policies

Establishing procedures for monitoring and auditing the effectiveness of the anti-money laundering program

• Determine the scope, frequency and method of monitoring and auditing activities
• Develop procedures for conducting risk-based reviews of transactions and activity patterns
• Establish a process for reporting any suspicious activities identified in the reviews
• Ensure that the monitoring and auditing processes are documented
• Designate a person or team to be responsible for the monitoring and auditing of the anti-money laundering program
• Put in place a system to track the results of the monitoring and auditing activities
• When all of the above are in place and documented, you can move on to the next step.

Establishing a system to detect possible money laundering activities

• Develop a system for identifying and monitoring suspicious activity, such as large or frequent deposits, withdrawals, or transfers.
• Utilize software that scans for suspicious activity, including any activity that falls outside of customer profiles or patterns.
• Invest in a quality transaction monitoring system that is able to detect suspicious activity based on criteria established by the organization.
• Create a process for reviewing and investigating suspicious activity and develop a protocol for reporting to relevant authorities.
• Create a system for reporting suspicious activity for both customers and employees.

Once these steps have been completed, you can check this off your list and move on to implementing a training and education program for employees.

Implementing a training and education program for employees

• Assess the level of knowledge and understanding of your employees on anti-money laundering policies and procedures
• Create an effective training program that covers the basics of your AML policy and procedures
• Ensure that all employees are properly trained and educated on the AML policy and procedures
• Assign a designated person who is responsible for administering the training program
• Consider using a mix of training methods, such as webinars, lectures, and seminars
• Make sure all employees understand their obligations and responsibilities to comply with the AML policy
• Make sure all employees are aware of their role in detecting and reporting suspicious activities
• Document the employee training, such as dates of training, topics covered, etc.

You’ll know when you can check this off your list and move on to the next step once you have assessed the knowledge level of your employees, created a training program, ensured all employees are properly trained and educated, assigned a designated person responsible for administering the training program, and documented employee training.

Developing a document retention policy for customer information

• Establish a written policy for document retention that outlines the types of customer information that your company must store and for how long.
• Ensure that the policy is compliant with applicable laws and regulations.
• Establish a process for securely storing customer information in a safe and secure environment.
• Ensure that customer documents are stored in a manner that is easily accessible and retrievable.
• Establish a system for disposing of customer documents when they are no longer needed.
• Review the document retention policy regularly and make any necessary updates.

Once these steps have been completed, you can move on to developing a system to monitor and detect possible money laundering activities.

Developing a system to monitor and detect possible money laundering activities

• Identify customer information that needs to be monitored
• Establish a system that can detect any suspicious customer activity
• Determine the best way to monitor customer information and detect possible money laundering activities
• Set up an alert system that notifies staff when suspicious activities are detected
• Develop a reporting process for any suspicious activities detected
• Train staff in the use of the system and the reporting process
• Regularly review the system to ensure it is working properly

Once these steps are completed, you can move on to the next step of establishing procedures for responding to potential money laundering activities.

Establishing procedures for responding to potential money laundering activities

• Create a response plan that outlines how you will investigate, verify and respond to any potential money laundering activities.
• Ensure the plan includes clear criteria for when to report a potential money laundering activity to the relevant authorities.
• Develop a policy to inform employees on how to respond to potential money laundering activities.
• Document any training materials for employees on how to respond to potential money laundering activities.
• Create a system for tracking and recording any responses to potential money laundering activities.

You will know you can check this off your list and move on to the next step when the response plan, policy, training materials and tracking system are created and documented.

Establishing procedures for reporting potential money laundering activities

• Develop procedures for when, how and to whom to report potential money laundering activities.
• Outline the channels, forms and methods of reporting.
• Ensure that reporting is completed in a timely manner and according to the procedures established.
• Monitor the effectiveness of the process and make changes to improve it when necessary.
• When you are satisfied with the reporting process, you can move on to the next step.

Establishing procedures for investigating potential money laundering activities

• Develop a team responsible for investigating potential money laundering activities - this team should include individuals with a variety of backgrounds and responsibilities, such as legal and accounting personnel, IT personnel, and compliance personnel
• Establish a process for investigating activities that appear suspicious - this should include methods for gathering and analyzing data, such as customer profiles, transaction histories, and account activities
• Create a protocol for communicating and coordinating with other departments, such as law enforcement, financial institutions, and government agencies
• Define the criteria that will be used to determine whether or not an activity is suspicious and requires further investigation
• Create a timeline for when the investigation should be completed and the results reported
• Develop a process for documenting and tracking the results of the investigation
• Establish an escalation process in the event that the investigation uncovers evidence of money laundering activities

You’ll know when you can check this off your list and move on to the next step when you have established procedures for investigating potential money laundering activities, including a team responsible for the investigation, a process for gathering and analyzing data, a protocol for communicating with other departments, criteria for determining whether or not further investigation is warranted, a timeline for completion, a process for documenting results, and an escalation process.

Establishing procedures for taking corrective action if money laundering activities are identified

• Establish procedures for how to respond if a money laundering activity is identified.
• Document the procedures, including who is responsible for carrying out each action and when any reporting to outside agencies must happen.
• Ensure that the procedures are compliant with all applicable laws and regulations.
• Train all relevant staff on the procedures.
• Review and update the procedures as needed.

Once the procedures have been established, documented, and trained, you can check this step off your list and move on to the next step.

FAQ:

Q: How does an Anti-Money Laundering Policy help me as a lawyer?

Asked by Laura on 11th February 2022.
A: An Anti-Money Laundering Policy is an important tool for any lawyer to help protect themselves and their clients against being part of money laundering activities. By having such a policy in place, you can ensure that you and your clients are not unknowingly facilitating the laundering of financial proceeds. This provides an additional level of protection against the serious consequences of being found guilty of money laundering or other illegal activities. It is an important part of any lawyer’s toolkit and should be taken seriously.

Q: What are the different types of Anti-Money Laundering Policies?

Asked by John on 20th April 2022.
A: There are a number of different types of Anti-Money Laundering Policies which can be implemented, depending on the specific needs and requirements of the lawyer or business. Generally, these policies require businesses to identify, monitor and report suspicious activity, as well as to have proper customer due diligence procedures in place. Some policies may also include measures such as data protection and cyber security, as well as measures to guard against identity theft and fraud. The specifics of the policy will depend largely on the type of business in question and the risk factors associated with it.

Q: What is the difference between UK, US and EU Anti-Money Laundering Policies?

Asked by Sarah on 8th August 2022.
A: The main differences between UK, US and EU Anti-Money Laundering Policies relate to the legal framework they operate within. In the UK, Anti-Money Laundering Policies are governed by The Money Laundering Regulations 2017 which sets out a number of obligations for businesses operating in the UK. In the US, there are two primary sets of laws – The Bank Secrecy Act (BSA) which primarily applies to financial institutions, and the USA PATRIOT Act which applies more broadly to all businesses in the US. In Europe, there is a single set of regulations known as The Fourth Money Laundering Directive which applies to all EU countries. There may also be slight variations between countries within each region, so it is important to understand any local legislation that applies to your business when creating your policy.

Q: Are there any specific requirements for creating an Anti-Money Laundering Policy for my SaaS company?

Asked by Emma on 21st September 2022.
A: The specific requirements for creating an Anti-Money Laundering Policy for a SaaS company will depend on a number of factors including the size and complexity of your business, its customer base and the nature of its services. Generally speaking, however, SaaS companies should have appropriate measures in place to identify any suspicious activity or potential money laundering schemes that may exist within their customer base or service offering. This could include customer due diligence measures such as identity verification procedures, screening services for high risk customers and monitoring transactions for any suspicious behaviour. It is also important to ensure that any information collected from customers is kept secure in order to ensure compliance with data protection regulations such as GDPR.

Q: What measures should I take if I suspect money laundering activities within my business?

Asked by David on 14th December 2022.
A: If you suspect money laundering activities within your business then it is important to take action quickly in order to stop this activity from occurring further or spreading beyond your business. Firstly, you should contact your relevant national financial intelligence unit (FIU) or anti-money laundering authority immediately in order to report your suspicions and obtain guidance on how best to proceed with your investigation into the matter. You should also review any relevant internal documents such as customer contracts or transaction records related to the suspected activities in order to gather further evidence which can be used in your investigation. It is also important to ensure that all staff members are aware of their obligations under your Anti-Money Laundering Policy so that they can take appropriate action if similar suspicious activity arises again in the future.

Example dispute

Suing a Financial Institution for Violation of Anti Money Laundering Policy

• The plaintiff can bring a lawsuit against a financial institution for violating anti-money laundering (AML) regulations.
• To prevail, the plaintiff must show that the financial institution failed to comply with its AML obligations or failed to comply with AML requirements established by the government or industry regulators.
• The plaintiff may also have to prove that the financial institution was negligent in its AML compliance and/or that it was aware of, but failed to address, suspicious activity.
• Damages may be awarded if the plaintiff can prove that the financial institution’s negligence caused them to suffer financial losses.
• Settlement can usually be reached through negotiation or mediation, but if necessary, the case can be taken to court.

Templates available (free to use)

Anti Money Laundering Policy

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