Here are the key aspects of AML checks:

1. Customer Due Diligence (CDD)

Identity Verification: Verifying the identity of individuals or businesses (name, date of birth, address, etc.) using documents like passports, national IDs, and utility bills.

Enhanced Due Diligence (EDD): For high-risk customers (e.g., politically exposed persons or individuals from high-risk countries), extra scrutiny is applied, such as obtaining additional information about the source of funds.

Ongoing Monitoring: Monitoring customer transactions on an ongoing basis to ensure consistency with their known profile and behavior.

2. Transaction Monitoring

Suspicious Activity Detection: Tracking transactions to detect unusual patterns such as large cash deposits, transfers between unrelated accounts, or high-frequency transactions that may indicate money laundering.

Automated Systems: Many institutions use software that flags potentially suspicious transactions based on predefined rules.

3. Risk Assessment

Institutions must conduct risk assessments to evaluate the level of risk posed by individual customers, geographies, products, or transaction types.

Risk-Based Approach: Different levels of scrutiny are applied based on the assessed risk. Low-risk clients might face less scrutiny than high-risk clients.

4. Sanctions Screening

Checking clients and transactions against sanctions lists, like those issued by the United Nations, European Union, or U.S. Treasury's OFAC (Office of Foreign Assets Control), to ensure no transactions with sanctioned entities or individuals.

5. Politically Exposed Persons (PEP) Checks

PEP Screening: Identifying individuals who hold prominent public positions and are at higher risk of being involved in corruption or money laundering. This includes government officials, senior executives of state-owned companies, and their family members.

Higher scrutiny and monitoring are required for PEPs.

6. Reporting

Suspicious Activity Reports (SARs): If a transaction appears suspicious, institutions are required to file a SAR with the relevant regulatory authority, detailing the activity and reasoning for suspicion.

Currency Transaction Reports (CTR): Reporting large cash transactions (e.g., over $10,000 in the U.S.).

7. Record Keeping

Institutions must retain records of customer identification, transaction data, and communications for a certain period (often 5-7 years, depending on jurisdiction).

8. Compliance Training

AML compliance programs include regular staff training to ensure employees understand how to recognize and report suspicious activity.

9. Regulatory Reporting and Auditing

Institutions are subject to audits by regulatory authorities to ensure AML compliance. Non-compliance can lead to penalties, fines, or even revocation of business licenses.