Regulation
Anti-money laundering
Also: AML
The regulatory regime that obligates payment institutions to detect and report suspicious activity.
Anti-money laundering (AML) represents the legal and technical framework used by financial institutions to prevent the conversion of illegally obtained funds into legitimate assets. In the United Kingdom and Europe, this is primarily dictated by the Money Laundering Regulations and various EU Anti-Money Laundering Directives, which require payment service providers to implement robust Know Your Customer (KYC) and Know Your Business (KYB) protocols. Acquirers and payment gateways must perform ongoing transaction monitoring to identify patterns indicative of layering or integration, such as unusual spikes in volume or high frequencies of low-value transactions. These entities are obligated to notify regulators like the Financial Crimes Enforcement Network (FinCEN) or the Financial Conduct Authority (FCA) through Suspicious Activity Reports (SARs) when thresholds or red flags are triggered. Failure to maintain these controls may result in the immediate termination of a Merchant Identification Number (MID) or significant regulatory fines for the processing institution.
Frequently asked
How does AML compliance affect merchant settlement times?
While standard settlements occur on a fixed cycle, AML triggers may lead to temporary funds holding or account freezes while an acquirer investigates suspicious transactions. If a merchant cannot provide proof of delivery or valid invoices when requested during an AML check, settlement may be delayed indefinitely until the compliance team clears the activity.
What is the difference between AML and sanctions screening?
AML is a broad set of procedures used to detect the movement of illicit wealth, whereas sanctions screening is a specific subset of these controls that checks entities against lists such as OFAC or the HM Treasury consolidated list. Sanctions screening ensures that a merchant or customer is not a prohibited individual or located in a restricted territory, which is a mandatory component of a complete AML programme.
Related terms
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