Solutions for AML Compliance in Remittances
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The money remittance industry is growing. In 2018, global remittances reached $689 billion: a figure that is expected to reach $746 billion in 2020. The trend is driven, in part, by digital remittance services, which are expected to see a growth rate of 11.75% between 2019 and 2024. As the remittance industry has developed, so have the methodologies that criminals use to exploit it. In a report on the industry, the Financial Action Task Force (FATF) identified specific vulnerabilities to money laundering and terrorism threats, emphasizing the need for suitable AML compliance in the remittance industry.
Accordingly, when it comes to the risk of AML, remittance firms must ensure their compliance solution can detect and prevent criminal activity and satisfy the relevant regulatory obligations (such as those imposed by FATF) on an ongoing basis.
Money remittance is an attractive target for criminals for a variety of reasons, including global inconsistencies in regulation and the criminal opportunities offered by digital remittance services. In order to detect and prevent money laundering activities, it is important that compliance teams understand the key risks posed by money remittance:
FATF requires financial institutions within member countries to implement risk-based AML compliance programs. In practice, this means that firms, including remittance service providers, must conduct risk assessments of their customers to determine the level of money laundering risk that they present. In alignment with FATF recommendations, remittance service providers must put a risk-based AML program in place with the following features:
Certain transactions or types of behavior may indicate that customers are using remittance services to conduct money laundering. These red flags include:
In order to deliver ongoing AML compliance in a remittance business quickly and efficiently, service providers should consider implementing smart AML software to handle their data collection and analysis needs. An AML software solution not only adds speed and accuracy to the compliance process but can scale with a firm’s needs and adapt to changes in legislation and emergent criminal methodologies on an ongoing basis.
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Customer A offers money transfers to over 150 countries in over 70 currencies | |
Regulated by |
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Screening workflow | Customer A doesn’t run AML checks at onboarding but instead screens both the payer and beneficiary for every transaction run |
Data | Sanctions – all lists |
Fuzziness setting | 20% |
Match rate | 1-1.5% |
Customer B allows individuals from the UK and US to send money to Africa | |
Regulated by | An agent under a payment provider in the UK that is authorized by the FCA |
Screening workflow | Customer B screens its customers at the point of onboarding, via an app used to sign up for its platform. Customers first go through an identification verification process, then AML checks |
Data | Customer B uses a search profile and has selected:
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Fuzziness setting | Exact match |
Match rate | 4-5% |
Customer C offers B2B payments and individual payments to over 160 countries | |
Regulated by |
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Screening workflow | Customers are screened at the point of onboarding |
Data | Customer C has set up a search profile and has picked lists from countries it is operating in:
|
Fuzziness setting | 20% |
Match rate | ~20% |
Originally published 09 July 2020, updated 24 July 2024
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
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