It is important for organisations to have a clear understanding of the business model of the company they are working with in order to ensure authenticity and protect against corrupt or fraudulent business practices. Moreover, it prevents the terrorist financing and money laundering activities associated with financial crimes. Additionally, KYB compliance procedures include a mechanism to establish ultimate beneficial ownership (UBO). Establishing Ultimate Beneficial Owner (UBO) makes it possible to determine which parties directly benefit from the business’s profits.
Putting Know Your Business into place is essential to preventing criminals from disguising illicit funds as legitimate income. All organisations should follow KYB process in order to protect their brand as well as reputation, reduce profits, and avoid legal repercussions.
What is the MR.AML process?
An essential part of KYB is the verification of a business’s legitimacy and identity through various methods. In this regard, it is necessary to verify documents related to the establishment of the business, the ultimate beneficial owners (UBOs), and the nature of the enterprise. Additionally, due diligence needs to be conducted on the reputation and risks associated with the business. By identifying and mitigating potential risks associated with their customers, Know Your Business services protects businesses before issues arise.
What is MR.AML regulation?
Know Your Business process is often considered to be an extension of KYC. This is due to the fact that KYB is a relatively new regulation. Despite KYC procedures being in place for decades, businesses have not been subject to the same screening, allowing fraudsters to take advantage of them.
As a result of the 4th AML directive passed in 2017, European regulators were able to correct this legal blind spot. KYB rules were added to customer due diligence requirements for banking institutions by the US Financial Crimes Enforcement Network FinCEN a year ago.
Complying with MR.AML rules
Globally, Know Your Business requirements generally mandate that regulated businesses assess the level of risk associated with their business relationships.
Due to these reasons, companies should develop an appropriate anti-money laundering strategy that includes the following steps:
Due-Diligence
A business due diligence process differs from customer due diligence in that it identifies the company’s ultimate beneficial owner (UBO) rather than verifying the customer’s identity. An evaluation of the risk of a business is possible by determining its UBO. Business relationships or monitoring require enhanced due diligence if UBO poses a higher level of risk.
Screening for PEP
A regulated organisation should screen business relationships with politically exposed persons (PEPs). The potential for political corruption poses a higher level of risk to businesses that have a positive PEP status.
Screening Sanctions
The restrictions imposed by another country on economic flows should be screened and adhered to by a country. An organisation should conduct checks on its employees as well as its company.
Adverse Media Screening
By monitoring adverse news articles published about a business, it may be possible to assess its reputation. A frequent update is provided by the ongoing motoring whenever a business’ reputation is adversely affected by media coverage.
Transactions Monitoring
Obtaining valuable information about a business’s risk status can be obtained by analysing its transaction activity. If large amounts of transactions are made to countries with high levels of financial risk, this may indicate the possibility of money laundering.
Is MR.AML for all organizations?
Know Your Business is not just important for banks. These requirements apply to the following individuals, organisations, and businesses based on the 5th AML directive:
Unregulated industries may also conduct Know Your Business verification, although the law does not require this. A company’s reputation can be safeguarded, and regulatory checks on business partners may protect assets.
Unregulated industries may also conduct Know Your Business verification, although the law does not require this. A company’s reputation can be safeguarded, and regulatory checks on business partners may protect assets.
