Every organisation with a structure must have rules and boundaries to function correctly. The goals of rules and laws are the same, but their interpretations and objectives vary significantly. To get a sense of the difference between the two, you need to begin with a clear understanding of their fundamental differences, purposes, operations, historical evolution, and enforcement methods. Learn the differences between AML Rules, laws and their purpose in anti-money laundering.
Anti-money laundering is an international network of rules, regulations, and institutions designed to identify money disguised as legitimate income. Tracking the money has been an effort of governments and law enforcement as they battle crime for decades. It all comes down to AML (anti-money laundering). Money laundering is the concealment of proceeds related to investment, including criminal activities that involve tax evasion, exploitation of human beings for commercial gain, or proceeds found through the drug trade and public deception.
It also applies to money sent in violation of the law to terrorist organisations. AML rules have affected governments, banks, and even individuals around the world.
To begin, rules and regulations range in formality and legal ramifications. Rules are often more informal and vary depending on the setting or scenario. They usually represent rules published by an authority, but may not have any legal ramifications if not followed.
In contrast, regulations are more formal and legally binding. Government agencies or other authority entities issue them to regulate and control certain activities or behaviours. Failure to comply with AML rules may result in fines or legal action.
This comparison outlines the key differences between AML rules and regulations in various aspects:
| Aspect | Rules | Regulations |
|---|---|---|
| Nature | Informal: Set by people, organisations, or groups to guide behaviour. | Formal: Established by a government or governing body, often legally binding. |
| Scope | Specific to a particular case or group. | Has a broader scope, including larger populations or even entire industries. |
| Enforcement | Less formal; depends on social or organisational norms. Consequences may vary and do not necessarily entail legal action. | More formal; made official by law with specific fines or punishments. |
| Source | Originates from persons, organisations, or community agreements; may lack legal force. | Backed by a legal framework created by government authorities or regulatory bodies. |
| Applicability | Limited to specific groups, organisations, or contexts; not generally applicable. | Applies broadly across sectors or populations under the jurisdiction of the governing authority. |
This breakdown emphasises the distinctions between the two concepts in formality, scope, enforcement, origin, applicability, and adaptability.
The Banking Authority (EBA) establishes compliance frameworks to combat financial crimes and ensure industry-wide standards. Let’s learn them in detail:
The Financial Action Task Force is an international organisation with 36 members worldwide. The FATF’s primary function is to establish worldwide standards for AML compliance. Its suggestions are globally acknowledged norms for combating money laundering and terrorist funding. FATF’s standards include Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures, frequent monitoring of questionable financial activity, and substantial consequences against people and organisations that fail to comply with these laws.
The European Union developed the Fifth Money Laundering Directive (5 AMLD) and the Sixth AMLD. The goal is to standardise member nations’ anti-money laundering/counterterrorism laws. It is developed and presented regularly after considering the dangers the market experiences and may encounter. Six directions have been shared thus far. The EU made various amendments to these directives based on when they were released. For example, the 5th AMLD, which includes prohibitions against cryptocurrencies, was released simultaneously with a push for their appreciation.
The Financial Conduct Authority is the agency in charge of regulating financial services in the UK. The FCA functions independently of the UK government. The organisation was founded on April 1, 2013, to implement precautionary regulations under Part 1A of the Financial Services and Markets Act 2000 (FSMA). The FCA’s objective is to control financial business conduct and market stability. It has the authority to develop AML regulations and implement, investigate, and execute them to accomplish this purpose.
The Chief Presiding Judge of the Hong Kong Special Administrative Region (HKSAR)
The Hong Kong Monetary Authority (HKMA) is the government authority that serves as the central bank and currency board of Hong Kong. The date of its creation is April 1, 1993. The HKMA was established and commenced operation with the Office of the Commissioner of Banking and the Office of the Exchange Fund. It supervises the stability of Hong Kong’s banking and monetary policy. (which, among other things, is responsible for anti-money laundering and counter-terrorist funding). It ensures that financial entities meet several legal requirements and develop an AML/CFT program. Organisations are required to carry out risk assessments, implement processes, and provide training to compliance officers by the HKMA AML policy.
Singapore’s central bank, the Monetary Authority of Singapore, regulates the service and financial sectors. As a government organisation, the MAS has a firm code of conduct to adhere to, with key principles identified to guide its work and behaviour, including professionalism, integrity, and fairness. It has governed Singapore’s financial evolution for nearly four decades, cultivating skills and strategies that have propelled the city-state to become a global hub of finance.
The MAS is responsible for formulating and executing monetary policy, regulating financial institutions, managing reserves and assets, as well as enhancing Singapore’s global economic standing. The MAS’s AML regulations must be adhered to by financial institutions. The MAS requirements are primarily in the areas of customer due diligence (CDD), know your customer (KYC), reporting, and monitoring.
The Bank Secrecy Act is the primary anti-money laundering regulation in the United States. The US Bank Secrecy Act was introduced in 1970, also known as BSA. Yet it’s still one of the most important sources of regulation for American and global financial institutions, with ripple effects throughout the industry. On the other hand, the BSA is an essential tool that necessitates financial institutions’ assistance in combating AML and other financial crimes. It has since been amended several times. Physically, it is also similar to the USA Patriot Act in its concerns regarding money laundering and terrorist financing.
The Australian Transaction Reports and Analysis Centre is Australia’s premier financial intelligence agency. Its primary goal is to prevent money laundering and terrorism funding. AUSTRAC also works to identify illegal risks and holes in the Australian financial system. Companies must comply with criteria primarily related to detection, monitoring, and reporting. AUSTRAC, as the Financial Intelligence Unit, reports its information to the appropriate mass and law enforcement authorities locally and abroad. It also participates in several national and state task teams that give specialist financial information to national security and international efforts against severe and organised crime.
Our solution helps you comply with regulations by identifying individuals and entities on various watchlists. Here is how our solution stands out:
Easily authenticate your customers and partners with a Customer Due Diligence program built by KYC Hub. Screen their identity documents against sanction lists, PEPs, and other dynamic global lists. Set up your customer onboarding process precisely as you like and ensure you are safeguarded against AML rules.
Receive instant notifications alerting you about changes in the risk status of monitored entities, accompanied by actionable insights to avoid non-compliance. With our state-of-the-art risk-based due diligence approach, you’ll receive real-time alerts about changes in a customer’s risk profile, enabling proactive action.
A sophisticated media intelligence system to track and monitor adverse news about individual and corporate clients while suggesting specific topics to follow. Screen against sanctions, PEPs, and global watchlists. Our proprietary contextual matching and entity resolution algorithms ensure you receive only relevant alerts, avoiding false positives.
AML checks help you stay on top of anti-money laundering measures with enhanced due diligence to identify financial crimes or illicitly sourced funds. KYC Hub assists in maintaining compliance with anti-money laundering laws while monitoring global watchlists, sanctions lists, and PEPs.
The automated checks are built into the system to bypass and accelerate screening. Streamline processing time with simple API integrations. Fast-track reviews under AI-led supervision, with false positives rolled back to save time and money. KYC Hub guarantees your security and compliance, keeping your company away from men with bad intentions and moving regulations.
KYC Hub’s AML Compliance solutions are compliant with global and domestic AML regulations. Compliance tools and fraud detection prevent a company from being fined by regulators due to non-compliance, which could endanger the brand. Leveraging sophisticated automation and AI insights, companies are able to simplify compliance processes while strengthening precision. With KYC Hub, organisations can remain compliant and prepare to fight financial crime in the future as well and ultimately win in the long run. Upscale your business security with us!
For start-up companies still in their early stages, compliance can be one of the...
Read More
