AML Compliance and Employees’ Training – Does it really matter?

The short answer is… Yes! 

If you are an entity that is obliged to comply with Anti-money laundering (AML) regulations (obliged entity) then you have no other option. An AML programme is essential and is an effective way to protect your company from being unwillingly exposed to high money laundering risks. 

The size of the company doesn’t matter. If you are an obliged entity, you need to comply anyway.  Non-compliance with AML regulations could expose a company to penalties, sanctions from supervisory authorities and other risks. 

AML compliance is not an easy process. Non-complying with the AML regulations exposes an entity, not only to monetary fines but also to reputational damage. Even if an entity is large enough and can pay the penalty imposed by the Competent Authority due to AML failures, the reputational damage caused cannot be calculated. 

Well-established and reputable firms are not less vulnerable to money laundering fines. A look in the AML fines imposed during 2021 include some well-established and reputable firms: 

• ABN Amro Bank was penalised with $574 million for shortcomings in AML controls 

• NatWest Bank was fined with £264.8 million for accepting and wrongly monitor large amounts of cash from a jeweller 

• Mishcon de Reya, a reputable law firm was fined with £232,500 for serious breaches in AML rules 

• BitMex Cryptoexchange was penalized with $100 million for illegal trading and AML violations 

AML regulators impose fines taking into consideration various factors such as: the gravity and duration of the infringement, the financial strength of the natural or legal person, the profit derived and the degree of cooperation with the supervisory authority, amongst others.  Smaller in size companies can still face huge penalties for non-compliance with AML rules taking into consideration their size and financial strength.  

Embedding a compliance culture 

It all starts with embedding an AML compliance culture within an organization which is a responsibility of the Board of Directors. The Board is responsible to appoint an AML officer and assistants, if necessary.  

The Board is also responsible to oversee the work of the AML officer, in many cases by designating one of its members to oversee and be responsible for the AML compliance of the entity.  

Additionally, the Board must ensure that there is a clear and quick reporting chain between the employees and the compliance officer. Additionally, the Board needs to ensure that employees are aware of their obligations to comply with AML rules. 

The importance of employees training 

The employees of a regulated entity are the most effective defence against money laundering. The employees can prevent money launderers from abusing the products or services provided by the regulated entity. 

Obliged entities are required to provide regular training to their employees, including the members of the Board of Directors, at least annually or as specified in their national Law. 

An effective training programme should consist of at least the following elements: 

1. Regularly: the training must be performed on a regular basis to ensure that the employees (including the Board of Directors) are aware to the money laundering and terrorist financing risks posed by the entity’s activities. 

2. Tailored: Training takes into consideration the different needs of the various positions and departments throughout the organization. 

3. Legal obligations: the employees should be aware what are their legal obligations, what they need to do to comply with the AML Law. 

4. AML requirements: Know how money laundering and terrorist financing work and what is expected by them. 

5. Internal controls: Understand the internal policies, controls and procedures: Employees need to know the entity’s AML controls, including CDD and how to implement those controls. 

6. Red flags: Employees are expected to be able to recognize and report suspicious activity to the AML officer. 

It is the job of the AML Officer to organise training sessions for the employees. Employees’ training can be time consuming for an organisation, but it is a legal requirement for all obliged entities. Obliged entities can be held responsible for the AML failures of its employees that was a result of lack of appropriate training. 

Anna Stylianou