A guide To establishing an Effective AML/CFT Framework in your business

A guide To establishing an Effective AML/CFT Framework in your business

Financial Institutions and Designated Non-Financial Businesses and Professions that do not abide by the Money-Laundering laws or regulations have to pay heavy penalties and face severe reputational losses.
Therefore, every business has to establish an effective AML/CFT framework to operate as per the legal requirements of the country.

How to frame effective AML Controls framework?

Here are a few ways in which you can effectively build AML Controls Framework:

1-Having Qualified Compliance Professionals

The first and foremost step to building an effective AML and CFT framework is to have an effective and efficient AML expert who wouldn’t
shy away from taking the help of creativity and innovation.

A practical AML/CFT framework requires a structure of corporate
governance that incorporates compliance professionals or officers who are fluent in terms of legal regulations requirements.

Anti-money laundering professionals are basically responsible for making
sure that the reported issues within the organization are addressed or looked after within the organization and within a time frame that will restrict you from further damage.

In addition to that, it is your moral duty to make all the employees of your organization and not just AML professionals know about the legal and ethical responsibilities that need to be effectively managed at an individual level as well in order to comply with the legal AML regulations.

In addition to that, all the employees must understand the fundamental idea of AML/CFT. In order to effectively comply with AML or CFT regulations, all the employees must undergo interdisciplinary training or certification programs in order to identify potential risks.

2- Training of Anti-Money Laundering Experts


Anti-money laundering is a pretty dynamic subject. There is always some sort of updates, changes in regulations, proposals, or laws happening. In addition to that, various methods continue to find channels in criminals with every passing day.

Improving the overall skill set of your employees is essential in order to
ensure that AML/CFT measures are actually implemented in the best
possible way.

Professionals from the finance department must clearly understand the
AML and CFT legislation and regulations for identifying and reporting any
suspicious transactions.

Likewise, management employees who have direct contact with customers
or the ones who process documents and money must understand the requirements of the Anti-Money Laundering Laws in the UAE.

Your entire staff must be well aware of the AML/CFT Framework and various roles of the consultants, compliance officers, officers, senior management, and the board of directors.

In addition to that, all of your staff members must be aware of ways in which they are supposed to react if at all they encounter suspicious activity.

Compliance. Trust. Transparancy

Customized and cost-effective AML compliance services to support your business always

3- Risk Assessment And Risk-Based Approach

The foundation of a practical counter-terrorism financing framework (CTF) and anti-money laundering (AML) is actually based on a risk-based approach.

Business enterprises should determine the risk level of the clients by
conducting an accurate risk assessment during the process of client
Post this, enterprises should aim to implement an efficient and effective
AML compliance program in accordance with the AML/CFT Framework. By developing a tailor-made control program in
accordance with the risk levels of your respective clients.

Here is why risk assessment is required for:

In addition to that, a risk-based approach is adopted in order to detect and prevent all sorts of money laundering activities.

However, risk-bearing capacity and the risk appetite of all the companies and customers are pretty different from one another. As a result, companies would be failing miserably if they try to implement the same AML controls for every customer.

There are basically two fundamental steps for organizations to move ahead with a risk-based approach. The first one is undoubtedly assessing the risk and the second one is to appropriate control processes to various risk levels.

4- Advanced Anti-Money Laundering Policies

Highly dynamic anti-money laundering policies are needed to protect a business enterprise from criminal activities like money laundering and fully comply with relevant regulations and laws.

Enterprises need to implement robust risk-based governance to guide systems and processes. Providing a practical anti-money laundering policy framework is the topmost priority when it comes to meeting AML obligations.

Anti-money laundering policies should be easily verifiable by the authorized regulators, reflecting the overall risk appetite.

For instance, your AML policies should incorporate customer risk ranking during the recruitment process and due diligence.

Business enterprises should know their customers in order to comply with local and global legal anti-money laundering requirements and operate within the purview of the established AML/CFT Framework.

5- Know Your Customer (KYC)

Know your customer processes incorporate the process of accurately and
completely defining the information of the respective customers. Generally,
KYC is the most critical step in the entire anti-money laundering control

Once you are sure of who your customers really are, the risk levels of these
customers can be evaluated without any hassle, and post which, you can
apply customer due diligence (CDD) processes.

Determining the level of risks of your customers or even potential
customers with the help of CDD makes the AML control process much
faster and efficient for the company.

During the process of CDD, the potential customer must be screened in
politically exposed personnel (PEPs) and the sanction list.

If any politically exposed person is found in this list, then the need and importance of enhanced due diligence (EDD) come into the picture.

This is simply because politically exposed persons are usually considered as individuals who hail from a high-risk profile, and thus, merely CDD processes might not be sufficient. As a result, the risks and threats related to the customer’s account opening can be detected, allowing you to take more effective AML controls and establish a highly-effective AML/CFT Framework.

Compliance. Trust. Transparancy

Customized and cost-effective AML compliance services to support your business always

6- Ongoing Monitoring

Information or risks of institutions or customers may change over a period of time. For example, individuals who are not PEP might become politically exposed person by taking up any new task.
Hence, it is essential to be familiar with the information of the customer that may change over a period, also changing the risk levels of that particular customer.

Therefore, all of this information should be updated in your systems at regular intervals.

In addition to that, the accuracy of this information should also be confirmed so that it does not lose its functions of the risk-based approach.
If you are unable to keep up with the constantly changing customer information, you have to be prepared for some severe consequences.

The AML and CTF framework or policies makes an effective risk management tool. In addition to that, an effective AML and CTF regime also reduces the probability of damage to the organization due to fraudulent activities.

7- Detecting And Reporting Any Suspicious Transactions

The primary purpose of anti-money laundering checks is to detect financial crimes and suspicious transactions. Financial crimes must be detected, and necessary precautions must be taken in order to bring your AML processes to their actual purpose.

Although it is pretty challenging to check suspicious transactions almost instantly, they can be detected with the help of transaction monitoring solutions available to you. All of these transactions are stopped immediately and passed onto some other AML experts.

8- Upgrade The Anti-Money Laundering System With AI-Powered Solutions

Upgrade The Anti-Money Laundering System With AI-Powered Solutions image

With the constant technological change, crimes are also changing their
pace and ways dramatically, resulting in the evolution and development of
the regulations. With this given, manual anti-money laundering controls
remain insufficient in organizations that are prone to the risk of money
laundering activities.

AI-powered anti-money laundering software solutions help you track the unusual transactions for the known patterns, and they reduce the risk of ML to a greater extent and thereby help in implementing an effective AML/CFT Framework.

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Frequently Asked Questions (FAQs)

Here are a few frequently asked questions about the socio-economic impact of money laundering activities.

AML/CFT is essential for the following reasons.

  • In order to protect the financial systems
  • In order to prevent criminals or money launderers from enjoying the proceedings of the money laundering activities
  • In order to restrict the criminals to develop formidable economic powers and challenge the stability.

If you are a financial institution or a designated non-financial business or profession, then the chances are pretty high that you are more prone to encounter pretty risky situations on a daily basis. Hence, each employee should be aware of the AML/CFT policies of your company so that they can also play their part effortlessly.

However, it will be the responsibility of the AML Compliance Officer to ensure that an effective AML/CFT Framework is implemented in the company.

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About the Author

Pathik Shah


Pathik is a Chartered Accountant with more than 22 years of experience in compliance management, Anti-Money Laundering, tax consultancy, risk management, accounting, system audits, IT consultancy, and digital marketing.

He has extensive knowledge of local and international Anti-Money Laundering rules and regulations. He helps companies with end-to-end AML compliance services, from understanding the AML business-specific risk to implementing the robust AML Compliance framework.