Anti-Money Laundering (AML)
Laws and regulations requiring financial institutions to detect, prevent, and report money laundering activities.
What is AML?
Anti-money laundering (AML) refers to a set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. Money laundering typically involves three stages: placement (introducing dirty money into the financial system), layering (complex transactions to disguise the trail), and integration (reintroducing the funds as apparently legitimate). US AML obligations are primarily governed by the Bank Secrecy Act (BSA), which requires financial institutions to maintain AML programs, file Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs for cash transactions over $10,000), and monitor customers for unusual activity. The Financial Crimes Enforcement Network (FinCEN) oversees AML compliance in the US.
Example
Deutsche Bank paid $2.5 billion in fines (2017) for failing to maintain adequate AML controls that allowed Russian clients to 'mirror trade' — simultaneously buying securities in rubles and selling identical securities in dollars — moving approximately $10 billion out of Russia. The case highlighted how inadequate AML controls at major banks can facilitate large-scale financial crimes.
Source: FinCEN — Bank Secrecy Act