What is Anti-Money Laundering (AML)?

What is Anti-Money Laundering (AML)?

Anti-money laundering (AML) refers to laws, regulations, and procedures that prevent criminals from disguising illegally obtained funds as legitimate income. These measures help detect and report suspicious activities, including offenses like securities fraud and market manipulation.

The cornerstone of an AML program includes the following:

  1. Senior management approval of a written compliance program.

  2. Designing a program capable of detecting and reporting suspicious activities.

  3. Implementation of a customer identification program (CIP) based on risk assessment.

  4. Independent testing of the program.

  5. Appointment of an AML Compliance Officer.

  6. Ongoing staff training.

  7. Regular customer due diligence, including monitoring and updating customer information.

In the context of financial institutions and securities firms, AML programs play a crucial role in maintaining the integrity of markets and preventing financial crimes. This includes compliance with the Bank Secrecy Act and its regulations, as overseen by organizations like FINRA (Financial Industry Regulatory Authority) under FINRA Rule 3310. This rule mandates minimum standards for AML programs, emphasizing risk-based procedures and the importance of understanding customer relationships.