AML Compliance – Best Practices

Last Updated on Feb 13, 2026, 2k Views

AML Compliance – Best Practices

Anti-Money Laundering (AML) compliance is essential for banks, financial institutions, and non-financial businesses to prevent money laundering and terrorist financing. Globally, AML frameworks are guided by standards set by the Financial Action Task Force (FATF).

Below are key AML compliance best practices applicable across industries:

1. Strong AML Governance & Tone at the Top

Establish a clear AML policy approved by the Board.
Appoint a qualified AML Compliance Officer (Money Laundering Reporting Officer – MLRO).
Ensure senior management oversight and accountability.
Conduct regular independent AML audits.

2. Risk-Based Approach (RBA)

Perform enterprise-wide AML risk assessments.
Classify customers as Low, Medium, or High risk.
Apply enhanced controls to higher-risk categories.
Update risk assessments periodically or upon major changes.

3. Customer Due Diligence (CDD) & KYC

Verify customer identity using reliable documentation.
Understand the nature and purpose of the relationship.
Identify Ultimate Beneficial Owners (UBOs).
Conduct Enhanced Due Diligence (EDD) for:
- Politically Exposed Persons (PEPs)
- High-risk jurisdictions
- Complex ownership structures

4. Ongoing Monitoring & Transaction Surveillance

Implement automated transaction monitoring systems.
Monitor unusual or suspicious activity.
Update customer information regularly.
File Suspicious Transaction Reports (STRs) promptly when required.

5. Sanctions & Watchlist Screening

Screen customers and transactions against:
- United Nations Security Council sanctions lists
- Office of Foreign Assets Control (OFAC) lists
- Domestic regulatory watchlists
Conduct real-time screening for new and existing customers.

6. Record Keeping & Documentation

Maintain KYC and transaction records for the legally required period.
Ensure audit trails are clear and retrievable.
Protect data confidentiality and integrity.

7. Employee Training & Awareness

Provide regular AML training to all staff.
Conduct role-specific training for high-risk departments.
Test employee understanding through assessments.

8. Independent Testing & Internal Audit

Conduct periodic independent AML reviews.
Address identified gaps promptly.
Implement corrective action plans.

9. Reporting & Regulatory Compliance

Timely submission of:
- Suspicious Activity Reports (SAR/STR)
- Currency Transaction Reports (CTR), if applicable
Maintain effective communication with regulators.