Understanding AML Compliance

October 2019
Anti-Money Laundering, or AML, regulation is a type of regulation which, similar to Know Your Customer (KYC), is designed to prevent criminals from using various industries and businesses. Compliance with these regulations are required for financial services around the world. 

Malicious actors often attempt to launder money: hide their involvement with illegally-gained money through various methods and channels in order to avoid detection and prosecution. There are various ways in which money can be laundered: through financial services such as banks and exchanges, spending the money in a gambling enterprise such as a casino and receiving winnings, purchasing goods such as art which are then sold off, or by various other means; all of these methods involve the criminal spending ‘dirty’ money and receiving ‘clean’ money that can’t be traced back to the crime. The measures to counteract these different money laundering methods, and others, all fall under the anti-money laundering regulations which are designed to combat the different styles criminals attempt to employ. 

Without AML measures, criminals would be free to use money made from illicit activities and send it around the world at will without being caught. Besides the obvious advantage this would give to criminals, and the social and economic impact on legitimate people and businesses this would have where it was taking place, there is also the linked concern that money gained through criminal activity can be a significant funding source for terrorism. When AML measures are missing or lacking, crime and terrorism is allowed to thrive. This is not a problem that has sprung up in the last few years; money laundering has been an issue almost as long as money has been around, though the term is thought to date back to the early 1900s where Italian monsters would use laundromat businesses to disguise their illegally-gained money. A report by financial services consultancy Z/Yen in London back in 2005 highlighted the issue when it estimated that money laundering involved well over £100bn in UK and US alone, and with the increasing popularity of international payment and remittance channels and an increase of more than 25% in Global GDP since then, there is likely to be a corresponding increase in money laundering. Indeed, the UNODC puts the estimated money laundering figure somewhere between 2-5% of Global GDP.

Despite the vital importance of AML regulations, complying with them can often be a time consuming and costly process. Various reports highlight the cost of compliance. Some companies perform ALM checks in-house, but have to spend valuable man-hours conducting the checks and take the liability of it onto themselves. Others may choose to outsource the AML checks to a third party, but that can be much more expensive. It is to technology that businesses must turn to find their answer; this is the approach taken by Blockpass for its solutions. 

The Blockpass Mobile App provides identity verification which covers both KYC and AML regulation compliance. Users fill out the relevant details and are checked against the required lists and criteria to ensure they are not associated with criminal activity. By having these checks performed by Blockpass’ partners, companies using Blockpass’ Identity Verification solutions do not have to worry about their personal liability in screening applicants. Due to the methods and approach Blockpass employs, and the technology being used, verification and onboarding happens almost instantaneously for pre-existing Blockpass users, and is usually very rapid for new Blockpass users. In addition, because Blockpass puts users in control of their data and certifications, the solution can be offered at a vastly reduced cost compared to traditional alternatives.   

Blockpass has three solutions which cover AML regulations, and other solutions for those that don’t require the AML component. The most comprehensive offering is the KYC Connect® Enterprise™ product, an enterprise-grade solution which offers the highest level and coverage of service. The flagship KYC Connect® Pro™ solution includes checks of customer identities against AML watchlists alongside authenticating documents. Finally, the KYC Connect® AML™ can be implemented alongside any document authentication system and uses the very same technology as the other solutions to flag malicious actors.