AML compliance requires engaging with financial regulators and comprehending national and international regulations everywhere you conduct business. After all, ensuring that your business operates in compliance with these laws is critical to keeping your customers and your business safe. The global AML landscape is diverse, and financial institutions must keep pace with developing rules and regulations in order to meet their compliance obligations.

With so much legal terrain to cover, a good place to start is with our outline of the most significant AML compliance regulations in the world and the agencies responsible for enforcing them.

Global - The Financial Action Task Force (FATF)

The Financial Action Task Force is an international organization dedicated to preventing money laundering and terrorism financing. With 37 member jurisdictions and two regional organizations, it represents the majority of major financial centers throughout the world. Its primary goal is to establish global AML compliance standards and oversee their effective implementation. In order to achieve this goal, the FATF releases updated AML/CFT recommendations on a regular basis.

Member states and their financial institutions should comply with FATF requirements by:

  • Implementing ID verification processes for Know Your Customer (KYC).
  • Implementing the FATF-recommended due diligence measures.
  • Keeping appropriate records on high-risk clients.
  • Monitoring accounts for suspicious financial activity on a regular basis and reporting it to the appropriate national authority.
  • Enforcing effective sanctions against people and related organizations who fail to comply with FATF regulations.

European Union - EU 5AMLD and 6AMLD

The European Union issues directives to prevent money laundering and terrorism financing around the world, thereby contributing to the integrity and growth of the financial system. Periodically released directives advise financial institutions about current money laundering, terrorist funding, and criminal threats. The EU's Fifth Anti-Money Laundering Directive (5AMLD) was published on July 9th, 2018, and went into effect on January 10, 2020, while the Sixth Anti-Money Laundering Directive (6AMLD) was released in late 2018 and went into effect in June 2021.

Financial institutions should be familiar with the following 5-6 AMLD regulations in order to comply with them:

  • 5AMLD: The Fifth Anti-Money Laundering Directive centers on cryptocurrency regulation, including a legal definition of cryptocurrency, reporting requirements, and crypto wallet laws. 5MLD also includes additional regulatory requirements for prepaid cards, high-value goods transactions, beneficial ownership, consumers from high-risk third countries, and politically exposed persons (PEP) lists.
  • 6AMLD: The Sixth Anti-Money Laundering Directive sets guidelines for a unified definition of money laundering offenses, an expansion of the scope of money laundering and the criminal culpability of individuals involved, and harsher penalties for those convicted of money laundering.

United Kingdom - The Financial Conduct Authority (FCA)

The Financial Conduct Authority (FCA), an independent, non-governmental organization, is in charge of regulating the UK's financial industry, including combating money laundering and other criminal acts such as terrorist financing. The FCA's broad goals include consumer protection, market integrity and stability, and competition encouragement. It also has the authority to establish and enforce rules, as well as undertake investigations to achieve those goals.

In practice, the FCA's authority includes the following:

  • Regulation: entails establishing minimum legal guidelines for financial products in the UK and prohibiting items that do not conform to FCA requirements.

  • Supervision: entails ensuring that UK financial institutions operate safely and in accordance with specific AML legislation, which includes risk assessments, monitoring suspicious activity, and reporting to appropriate authorities.

  • Authorization: entails requiring financial organizations to register and meet certain conditions before being granted permission to operate in the UK.

The United States - The Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) is the primary anti-money laundering regulation in the United States, and it is enforced by the Financial Crimes Enforcement Network (FinCEN). The BSA's primary focus is money laundering, but its jurisdiction has grown to include other financial crimes as well. The Patriot Act, for example, was updated in 2001 to incorporate counter-terrorist funding (CFT) requirements. Failure to comply with BSA laws may result in prosecution under the US criminal code, with penalties including imprisonment and fines of up to $250,000.

Financial institutions must comply with a number of regulations under the BSA, including:

  • Compliance Program: US financial institutions must establish and operate an internal anti-money laundering program according to their risk profile. AML programs must contain documented policies and procedures, employee training, audit schedules, and the designation of a compliance officer.

  • Reporting: The BSA imposes several AML reporting and filing duties, including Suspicious Activity Reports (SAR), Currency Transaction Reports (CTR), and 8300 forms for high-value transactions.

  • Record Keeping: Financial institutions must retain extensive records of suspicious activities, including the identity of customers and the number of their transactions.

Canada - Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is in charge of aiding in the identification, prevention, and deterrence of money laundering, terrorist financing, and other risks to Canada's security. Its objective is to detect, prevent, and punish acts of money laundering and terrorism financing.

China - China Banking and Insurance Regulatory Commission (CBIRC)

As an independent, ministry-level supervisory office reporting directly to the State Council, the China Banking and Insurance Regulatory Commission (CBIRC) is in charge of monitoring the banking and insurance sectors across the People's Republic of China (PRC). It is authorized to execute both supervisory and regulatory tasks for banking and insurance business activities,  preserve fair competition in the banking and insurance sectors, and defend the legitimate rights and interests of stakeholders such as depositors and insurance policyholders. Except for the territories of Hong Kong and Macau, it has jurisdiction throughout the PRC.

Australia - Australian Transaction Report And Analysis Center (AUSTRAC)

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the primary financial intelligence agency of the Australian government, responsible for countering money laundering, terrorism financing, fraud, and other financial crimes. AUSTRAC works to expose illegal activities and abuses of the Australian financial system under the jurisdiction of the Anti-Money Laundering and Counter-Terrorism Financing Act (2006). They monitor, report on, and enforce Australian anti-money laundering rules.

Singapore - Monetary Authority of Singapore (MAS)

The Singapore Monetary Authority (MAS) is the country's central bank. It also regulates the financial industry. The MAS's responsibilities include administering monetary policy and supervising financial institutions. It also has rules in place to prevent money laundering and terrorist financing. The MAS fines financial institutions that do not follow policies.

It is also accountable for the smooth operation of financial markets, ethical behavior, and investor education. The MAS also collaborates with the financial industry to promote Singapore as a dynamic international financial center.

Hong Kong - Hong Kong Monetary Authority (HKMA)

The Hong Kong Monetary Authority (HKMA) is in charge of the banking system's stability and monetary policy in Hong Kong. The HKMA is also the regulatory organization in charge of fighting money laundering and terrorist financing under the jurisdiction of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. In this role, it strives to guarantee that Hong Kong's financial institutions comply with a number of legislative obligations, the most essential of which is the formulation and implementation of an efficient AML/CFT program. That program must include the following features in order to comply with HKMA AML policy:

  • Risk assessment: Financial institutions must design their AML program around the unique AML/CFT threats they face.

  • AML/CFT programs must incorporate a number of procedures and controls, such as independent audit schedules, personnel training and screening, and compliance management.

  • Compliance officers: Each financial institution must appoint a compliance officer with adequate authority to oversee its AML/CFT program and suspicious activity reports.

India - Financial Intelligence Unit (FIU)

The Financial Intelligence Unit (FIU) is India's major national body in charge of receiving, processing, analyzing, and disseminating information on suspicious financial transactions. It contributes to the protection of the financial system from the misuse of money laundering, terrorist financing, and financial crimes.

Japan – Financial Services Agency (FSA)

The Financial Services Agency (FSA) is a Japanese government agency and an integrated financial regulator in charge of monitoring the banking, securities and exchange, and insurance sectors to safeguard the stability of Japan's financial system. To comply with FSA laws, Japanese financial institutions must use a risk-based strategy for AML/CFT, including screening measures for international sanctions, adverse media, and politically exposed persons (PEPs).

How can Flagright help?

In case you missed it, we recently published a blog post on how to build a comprehensive AML policy. If you're a fintech or neobank, it's essential that you familiarize yourself with these guidelines - they'll help keep you compliant and protect your business from risk.

Wherever your company is located, you need to abide by local and international regulations. However, it can be challenging to stay on top of jurisdictional issues while maintaining effective business practices. This is where Flagright can help.

Our extensive suite of AML compliance solutions, which includes real-time transaction monitoring, case management, customer risk assessment, sanctions screening, AI Forensics, and more, satisfy and comply with the regulatory bodies outlined above.

Contact us here to schedule a free demo.