Anti Money Laundering: Keep Your Assets Safe in the Digital World

Anti-money laundering (AML) is a system of regulations, guidelines, and laws that strives to identify attempts to conceal criminal activity as lawful income. Infractions include small-scale drug sales and tax fraud, along with visible corruption and the sponsorship of terrorist organizations, are all covered up through money laundering.

With a share of 31.31% in 2017, North America dominated the worldwide anti-money laundering software industry, accounting for 271.8 million dollars in revenue. By 2023, it is anticipated that the anti-money laundering software industry would produce sales of about 1.77 billion US dollars.

The growth of the finance sector, the abolition of global capital restrictions, and the ease with which intricate webs of monetary operations could be carried out led to the development of AML monitoring regulations.

Strategies for Money Laundering

Money launderers frequently use cash-generating enterprises owned by accomplices to transfer dirty money, or they may inflate invoices in transactions involving shell companies. Money transfers used in layering online transactions are intended to hide the source of illegal payments. By dividing a large transfer into simple components, a technique known as structuring, or “smurfing,” might avoid reporting requirements and AML screening.

Explaining Anti Money Laundering (AML)

Banks were required to report cash deposits of more than $10,000 under the Bank Secrecy Act of 1970, but since then, AML regulations in the US have expanded to include a complex set of rules requiring financial companies to conduct due diligence on their clients and look for and detect fraudulent transactions.

Major Stages of Money Laundering

Following are the three major stages involved in the money-laundering process:


  • Foreign bank accounts are the act of physically transporting small sums of cash outside of the country that must be declared to customs, storing them there, and then sending the money back home.
  • False invoicing is when fake invoices are submitted to match cash deposits, giving the impression that the money is being paid in settlement of the fake invoice.
  • In aborted transactions, Money is given to an accountant or a lawyer to hold in their customer account in order to settle a planned transaction. The trade is terminated shortly after that. The client receives payment back from an unquestionable source.
  • Cash enterprises are combining the proceeds of crime with legal takings. This works well in industries that have little or no variable expenses, like casinos, car washes, tanning salons, strip clubs, and parking lots.
  • Smurfing refers to depositing small sums of cash below the anti money laundering reporting level to bank deposits or bank cards, then utilizing them to pay for costs, etc.


In order to make transactions as difficult to trace as feasible, layering basically involves employing placement and extraction in different amounts repeatedly.


Taking the cash out in order to use it without drawing notice from security forces or tax authorities is the last step. In this perspective, criminals frequently accept a 50% “shrinkage” in the wash and are ready to pay payroll as well as other taxes to end up making the “washing” appear more official.

  • Dividends are distributed to shareholders of businesses run by criminals.
  • Loans made to shareholders or board members that won’t be repaid.
  • False employees are a means of recovering the money. Typically, cash is paid and received.

Definition of Know Your Place (KYC)

Verifying the identification of new clients, often known as Know Your Customer (KYC), is where compliance for banks begins. Banks are expected to know the nature of a customer’s activity and confirm that deposited monies are from a genuine source in addition to confirming the client’s identity.

According to a recent survey, more than 70% of applicants in Poland from 2019 to 2020 said their businesses had a globally accessible client knowledge base.

Additionally, as part of the KYC procedure, banks and dealers must check new clients’ names against databases of criminal suspects, people and businesses that are subject to sanctions, and “potentially vulnerable persons”: foreign public officials, their relatives, and close allies.

Aiming to thwart such schemes at the initial deposit window is the KYC procedure.

Customer Due Diligence (CDD) Explanation

“Customer Due Diligence” is essential to the KYC procedure, for instance by verifying the veracity and accuracy of the information a significant customer submits. However, it is also an ongoing process that includes both current and past clients as well as their online transactions.

Continuous examination of each client’s potential for money laundering is necessary for customer due diligence, and those customers who are recognized as having higher non-compliance risks should receive a more thorough investigation. Customers who are added to penalties and other anti money laundering lists must be identified.

The core requirements of customer due diligence include recognizing and authenticating the client’s identity, verification, and confirmation of beneficial shareholders of a company opening a bank account who own a share of at least 25%.

To create client risk profiles, one must comprehend the nature and objective of relationships with customers, and maintain continual surveillance to spot unusual transactions, report them, and update customer data. The AML security holding period, which mandates that deposits must stay in an account for at least five days of trading before they can be moved elsewhere, is one regulation in place to prevent layering.

How Do AML, CDD, and KYC Differ From One Another?

Customer Due Diligence (CDD) refers to the examination financial companies (and others) are expected to conduct to prevent, identify, and expose infractions. AML is the general term for the legislation, regulations, and processes aimed at discouraging money laundering. Know Your Customer (KYC) regulations require customer due diligence when screening and verifying potential customers.

Is it Possible to Prevent Money Laundering?

According to a high-level United Nations commission, money laundering would be responsible for $1.6 trillion in annual flows, or 2.7% of the world’s GDP. The AML compliance can try its best to control money laundering rather than eradicate it completely given that projected annual flows are close to 5% of the world’s economic output. Despite the fact that anti money laundering regulations undoubtedly make their lives more difficult, money launderers appear to never run out of resources or collaborators.