AMLCFT

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) is a set of laws, policies, and procedures designed to detect and prevent money laundering and the financing of terrorism. It is implemented by governments, financial institutions, and regulated sectors to identify illicit proceeds, prevent their integration into the economy, and disrupt funding for extremist activities. A risk-based approach guides compliance, with higher-risk customers, products, or geographies receiving enhanced controls.

Key elements include customer due diligence (CDD) and enhanced due diligence (EDD), ongoing transaction monitoring, recordkeeping, and reporting. Financial institutions are required to verify customers’ identities, assess the source and purpose of funds, monitor transactions for suspicious activity, and file suspicious activity reports (SARs) or equivalents with the national financial intelligence unit. They must maintain appropriate internal policies, controls, governance, and employee training. Beneficial ownership information and periodic due diligence are common components.

Regulators align with international standards, notably the Financial Action Task Force (FATF), whose recommendations set criteria for identifying and mitigating risks. Jurisdictions implement these standards and may undergo mutual evaluations. Designated non-financial businesses and professions (DNFBPs) such as lawyers, real estate agents, casinos, and jewelers are often subject to AML/CFT requirements as well.

Challenges include the emergence of digital assets, rapid fintech innovation, cross-border transactions, and evolving criminal typologies. Regulators respond with updated guidance, enhanced cooperation, data-sharing arrangements, and enforcement actions. The AML/CFT framework evolves to protect financial systems while balancing privacy and legitimate business needs.