Why you need an AML monitoring solution in your KYB

In 2023, Binance, the world’s largest cryptocurrency exchange, faced a staggering $4.3 billion fine for failing to comply with anti-money laundering (AML) regulations and allowing illicit activities to thrive on its platform. Following the conclusion of the case, officials made it clear that AML violations will not go unpunished. 

“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa Monaco. Acting Assistant Attorney General Nicole Argentieri of the Justice Department’s Criminal Division reiterated, “Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”

While this is an extreme example, it highlights the importance of being vigilant and adhering to AML regulations. The Justice Department’s public commitment to prosecuting violators highlights the need for businesses of all sizes to take their AML responsibilities seriously. 

Ensuring compliance begins with understanding the connection between Know Your Business (KYB) procedures and AML monitoring. The following guide explores the relationship in detail and explains best practices for implementing effective solutions.

The connection between KYB and AML monitoring

KYB is a crucial component of anti-money laundering and counter-terrorism financing (CTF) compliance. AML procedures aim to detect and prevent financial crimes such as money laundering, fraud, and terrorist financing. KYB focuses on verifying the legitimacy and identity of business clients to ensure they are not involved in illicit activities. 

Regulatory requirements

Global regulatory requirements for AML and KYB are stringent. While they vary by jurisdiction, some key regulations include:

• USA PATRIOT Act: Enacted in response to the 9/11 terrorist attacks, this act requires financial institutions to implement robust AML measures, including customer identification programs and ongoing AML monitoring to detect and report suspicious activities. 
• EU’s 6th Anti-Money Laundering Directive (6AMLD): Expands the scope of AML regulations in the EU, introducing harsher penalties for noncompliance and holding businesses accountable for a wider range of financial crimes.
• Financial Action Task Force (FATF) recommendations: Provide a global standard for AML and CTF measures, urging countries to implement effective regulatory frameworks. The recommendations include detailed guidelines for sanction screening, customer due diligence, and the use of business monitoring solutions.

Each of these regulations mandates rigorous initial and ongoing AML monitoring to ensure businesses do not engage in or facilitate financial crimes. Noncompliance can lead to severe penalties, including hefty fines, criminal charges, and reputational damage—as evidenced by the recent Binance case and other notable cases involving companies such as Danske Bank, HSBC, and Standard Chartered.

Mitigation of financial crimes

Integrating AML monitoring solutions and KYB processes helps mitigate financial crimes by ensuring continuous surveillance of transactions and business activities. This ongoing scrutiny allows organizations to detect suspicious activities such as unusual transaction patterns, high-volume cash flows, and dealings with high-risk jurisdictions.

AML monitoring software can detect layered transactions designed to obscure the origin of illicit funds, identify and flag transactions linked to individuals or entities on international watchlists, and ensure businesses do not engage in transactions with sanctioned entities or individuals.

Enhanced trust and reputation

Effective AML monitoring builds confidence among stakeholders by showcasing a proactive approach to risk management and regulatory compliance. This ultimately creates a safer and more transparent business environment. Clients and partners are also more likely to engage with companies that enhance trust and protect their reputations by demonstrating a commitment to preventing financial crimes. 

Best practices for integrating AML monitoring into KYB

Properly integrating AML monitoring into the KYB process can help businesses ensure compliance and do their part to prevent financial crimes. With the right tools and best practices, organizations can ensure seamless integration, robust monitoring, and enhanced security against illicit activities. 

1. Select industry-leading AML monitoring tools  

Advanced tools and technologies help organizations stay a step ahead of criminals. Look for solutions with the following features:

• AML monitoring software: Used to analyze transaction patterns, identify suspicious activities, and generate real-time alerts. This technology provides comprehensive coverage and automates the monitoring process, making it more efficient and accurate.
• Comprehensive databases: Access to all global watchlists, sanctions databases, politically exposed persons (PEP) lists, and adverse media databases ensures thorough background checks.
• AI and machine learning: AI-enhanced algorithms improve the accuracy of business records and help quickly identify potential risks. These technologies enable continuous learning from data, enhancing suspicious activity detection.

Markaaz offers access to the industry’s most advanced firmographic, compliance, and financial risk analysis. With AI-enhanced matching algorithms, enhanced entity resolution processes, and a directory of 480 million global business records, Markaaz creates the most precise business records globally. Our database offers comprehensive coverage across approximately 200 countries, including key regions like the US, EU, and Asia. These are just a few of the features that make Markaaz a standout option among AML and KYB compliance solutions.

2. Integrate AML checks into the KYB process

Integrating AML checks into the KYB process ensures thorough vetting and ongoing monitoring. The following steps will help you seamlessly incorporate AML monitoring into your KYB workflows:

• Assess your current process: Identify gaps and areas for improvement.
• Select AML monitoring tools: Choose tools that align with your business needs.
• Complete data integration: Integrate selected tools with your existing databases and systems for seamless data flow and comprehensive monitoring.
• Develop a risk-based approach: Implement a risk-based framework that prioritizes more rigorous scrutiny for high-risk transactions and entities.
• Commit to training and awareness: Ensure your compliance team is well-trained in how to use the new tools and understands the importance of AML checks within KYB processes.
• Complete continuing monitoring and feedback: Establish a system for continuous feedback and improvement, regularly updating your processes based on the latest regulatory requirements and threat intelligence.

Strengthen your KYB and AML compliance with Markaaz

By offering screening against all global watchlists, sanctions lists, PEPs, and adverse media databases, Markaaz provides comprehensive business verification solutions that help companies maintain both AML and KYB compliance. Integrating Markaaz into your KYB procedures improves accuracy, streamlines the verification process, and enhances overall operational efficiency.  

Connect with our team to learn more about how our advanced solutions can simplify your compliance efforts and secure your business operations.