AML Technology as a Strategic Asset for High-Growth Companies

Compliance is one of the most important aspects for businesses that operate in fintech or have a high volume of transactions. Breaking a certain regulation can lead to hefty fines and various legal troubles. 

It’s crucial to implement the necessary tools in order to protect the business from different types of scams, but also from attempts at money laundering. Of course, no business would want to be involved with money laundering, but certain individuals can exploit your platforms. 

The technology behind AML processes has been evolving over the past decades, and it’s essential for protecting your company in the digital world. We’ll explore the characteristics of AML technology and its essential advantages. 

What’s AML technology 

There isn’t a single definition of AML technology. However, we can say that AML technology refers to the systems, tools, and software solutions used to prevent, detect, and report suspicious financial activities.

These activities are often tied to money laundering, fraud, terrorism financing, or other illicit behavior. This type of software ensures that numerous processes associated with compliance and security are carried out with ease.

For example, it automates compliance tasks, supports Know Your Customer (KYC) checks, tracks transactions, and flags unusual activity based on pre-defined or machine-learned rules. Another crucial feature includes PEP screening.

PEPs, or politically exposed persons, are individuals who have been associated with political parties or governmental positions. Due to their power and money, they are considered risky users. 

This is because they can exploit financial platforms in order to launder their funds, compromising one’s business. AML software stops PEPs from exploiting the platform by recognizing them in a timely manner, and by scanning their credentials through multiple blacklists, sanctions lists, and news sources. 

Core Functions of AML Software

AML monitoring is one of the key parts of AML technology. AML monitoring systems continuously analyze transactions to detect red flags, such as large cash movements, unusual patterns, or transfers involving high-risk jurisdictions.

With the rise of artificial intelligence and machine learning, AML monitoring has become more efficient and helpful than ever. This is because AI allows the software to analyze a lot more data, providing companies with more insights. 

AML monitoring enables companies to recognize suspicious activities in real time, preventing any real harm before it unfolds. It’s also extremely helpful in terms of generating audit documents for regulators and streamlining the processes of multiple departments. 

Strategic advantages of AML tech

High-growth companies often face a significant influx of new customers, partners, and transactions, all of which can compromise a company’s compliance. AML technology offers a few key advantages that can directly help with that problem.

The first advantage we can mention is operational efficiency. AML software automates labor-intensive tasks like document collection, screening, and risk assessment. This helps teams to focus on more important, and deeper, work. 

It streamlines these tasks, but it also ensures that the risk of human errors is minimized. This advantage can be tied together with scalability, which is crucial for successful companies. High numbers of new users are a good sign, but they can often lead to problems.

If, along with regular users, a larger number of fraudsters join your platform, you should have the proper defenses against this. Similarly, if numerous PEPs start joining your platform, a robust AML solution can help you prevent all problems associated with this. 

AML tech minimizes exposure to financial crime and the reputational damage that comes with it. Protecting your finances in the long run is a key advantage, as it gives you a competitive edge. If your business is known for extensive security practices, then it’s likely that customers will prefer your platform over a competitor that has suffered fraud in the past.

The increase in compliance allows businesses to start conquering new markets. For example, if a business isn’t compliant with regulations in Europe, the implementation of this software can help businesses start operating according to that market as well.

Although many businesses are self-sufficient, some rely on investors. AML technology ensures additional confidence and security, allowing investors to be more comfortable with investing larger sums in a specific business. 

Industries where AML is necessary 

One of the most obvious industries in which AML software is necessary is finance and fintech. Businesses that provide payment systems, accounting software, and similar products must be compliant with various regulations. 

The use of AML software can help them become and stay compliant in an industry where compliance is crucial, and the regulations are tighter. 

Similarly, online platforms that offer crypto services also need AML processes in place.

Due to the anonymous nature of cryptocurrencies, many wrongdoers can misuse crypto platforms for money laundering and other types of fraud. AML is crucial if your company is dabbling in crypto, in any way. 

Similar to crypto platforms, but more traditional, online banks, or neobanks, should integrate AML into digital banking workflows to streamline KYC and reduce onboarding time. Payment processors that handle large volumes of transactions should also seriously consider implementing AML tech. 

The more transactions there are, the higher the chances of some of them being fraudulent. This is why it’s crucial to implement the necessary software that will monitor these transactions. 

Online stores don’t have as many responsibilities as online banks or financial platforms, but they can become victims of AML and fraud, just the same. This is especially the case for businesses that operate cross-border.  

For example, online stores can become victims of chargeback fraud, which isn’t exactly money laundering, but many AML solutions can help prevent this type of fraud. It can help them detect suspicious seller/buyer behavior and flag fake accounts or illegal listings.

AML tool key features

A dashboard of an AML tool can have a centralized place for all the transactions that have occurred. This real-time tracking can be of great help in recognizing suspicious activity. 

Once a transaction is recognized, it can be categorized based on the multiple characteristics of who made it and how it looks. AML tools have access to global databases of stolen or leaked credentials. 

If a user makes a transaction using stolen credentials, the transaction can be canceled, based on other factors. For example, if the name or financial information doesn’t match the email, or the location in which the account should be based. 

Of course, a single red flag doesn’t immediately mean that a transaction is fraudulent. AML tools can recognize and flag out-of-the-ordinary transactions based on multiple factors, saving you a headache. 

Choosing the AML tech

Choosing the right technology depends on your business model, regulatory exposure, and growth goals:

• Startups and SMBs may prefer modular, API-first tools that scale with them.
• Enterprises might look for platforms with broader governance and reporting capabilities.

While there are many AML platforms that are great, there are business-specific characteristics that can make one platform preferable to others. An obvious aspect that can dictate which platform should be chosen is price. 

SMBs should consider using platforms that have plans for cheaper teams. However, this can be a trade-off in terms of features. This is why it’s crucial to audit your business and understand which features can bring the most bang for the buck. 

Real-time transaction monitoring can benefit all businesses that we’ve mentioned. However, if you’re operating an online store, you might want to pick a platform with chargeback fraud prevention, rather than one that doesn’t have this feature. 

Overall, the choice depends on the features that will be most efficient in your specific case and industry. You should also consider the potential changes that can happen in the future, for example, you should pick scalable solutions in case you consider your company high-growth.

On the other hand, exploring which regulations are a certain platform compliant with can help you join new markets in the future. 

Conclusion

While this article talks about successful and high-growth companies, there aren’t businesses that are deemed too small to become victims of fraud, or in this case, money laundering. It’s always important to implement the latest AML technology to protect yourself.

Although software can be costly, especially for businesses in risky industries, it’s still more affordable to pay for software than to become a victim of money laundering. This can lead to direct loss of profit and unnecessary expenses if you get fined.

Similarly, if your business gets a reputation for violating regulations, your customer base will have lower trust, and you can expect your profits and long-term customer loyalty to drop. Hopefully, this article will motivate you to implement AML tools and become safe.