There’s a fissure in the financial world.
The schism has split the payments ecosystem into two groups: those who follow anti-money laundering (AML) compliance, and those who ignore them.
Unfortunately, the second tranche of players has chosen to risk their reputations, and in many cases, their very future in the financial world.
Indeed, as money laundering methods proliferate in the digital economy, AML regulations have become a safeguard for payment processors across the globe.
Today, we will explore the role of AML protocols in cross-border payments, review the latest regulatory demands on financial institutions, and explore the devastating costs of non-compliance.
Where Does Money Laundering Come From?
Money laundering is alive and well.
Though it may be harder to spot in the digital world, criminals have become very creative.
Al Capone himself would be proud.
After all, it was the legendary Chicago gangster who opened literal laundromats—cash-only businesses—to mix his illicit and legitimate earnings.
And that’s exactly what money laundering provides: a cold paper trail that disguises the source of ill-gotten gains.
Today, money-laundering is arguably easier to process than ever before.
In fact, drug kingpins, terrorists, and other bad actors are using mobile platforms like Cash App—and even video game currencies—to effortlessly “clean” their assets.
The Critical Role of AML in Cross-Border Payments
The meteoric rise of cross-border payments has not gone unnoticed.
After all, global payments are anticipated to surge from $190 trillion in 2023 to nearly $290 trillion in 2030.
While these numbers are difficult to grasp, the criminal underclass sees nothing but dollar signs. Like flies to light, they seek to exploit loopholes in the payments ecosystem.
Unfortunately, they have already been quite successful in their aims. According to the United Nations, nearly $2 trillion is laundered by banks every year—roughly 5% of the global GDP.
That’s why government agencies around the world are taking action, especially in the U.S.
Building upon the foundations of Bank Secrecy Act of 1970 (and the Money Laundering Control Act of 1986), new AML regulations and watchdog groups have emerged, including:
- The USA Patriot Act of 2001, which set the minimum requirements for AML compliance, increased fines for non-compliance, and expanded information-sharing between banks and regulators.
- The Anti-Money Laundering Act of 2020 (AMLA), which modernized the original Bank Secrecy Act and increased existing whistleblower protections.
- The Financial Crimes Enforcement Network (FinCEN), which oversees the implementation and enforcement of AML policies on behalf of the Treasury Department.
Beyond the United States, there are also many international organizations united against money laundering, including the Financial Action Task Force (FATF), the Egmont Group of Financial Intelligence Units, and the Joint Money Laundering Steering Group (JMLSG).
Adhering to AML regulations is no longer a suggestion. In 2024, it’s the law of the land.
That’s why non-compliance is increasingly punitive for financial institutions.
Challenges of Complying With AML
Banks, fintechs, and payment processors have a lot to manage.
As transactions occur around the clock, emerging AML regulations often take a backseat to more immediate concerns.
While many organizations lack bandwidth, additional challenges make compliance especially hard to achieve, including:
- Lack of standardization: because AML regulations vary widely across jurisdictions, most companies struggle to streamline their compliance efforts.
- Financial burdens: true compliance incurs a hefty price tag, which many smaller institutions are unable to carry.
- Staffing shortages: in addition to exorbitant costs, companies often struggle to find compliance officers qualified to enforce AML policies.
- Data management risks: AML regulations increase the collection of personal data. Therefore, some institutions worry that true compliance could make them a prime target for a cyberattack.
- Process inefficiencies: legacy software and manual data-entry processes almost guarantee AML non-compliance. Therefore, financial institutions are encouraged to integrate AI tools, biometric identity verification, and robotic process automation (RPA) to satisfy regulatory demands and unburden their staff from time intensive processes.
Beyond these core challenges, companies must still face the largest obstacle of all:
the constant evolution of money laundering methods.
As the methods evolve, so do the regulations.
This carousel of change can be daunting to even the most battle-hardened institutions.
AML: The Cost of Non-Compliance
When companies fail to satisfy AML regulations, bad things happen.
The risks of non-compliance include ongoing legal consequences, damaged reputations, loss of credit ratings, disruption of operations, and even the permanent closure of the business.
Worse, non-compliance can also incur high-profile fines. For example:
- In 2012, U.S. federal regulators fined HSBC $1.9 billion for AML non-compliance.
- In 2022, the SEC charged Danske Bank $2 billion for violating the Danish AML Act.
- In 2023, the Justice Department hit Binance with a $4 billion non-compliance penalty.
Nevertheless, financial losses are not the greatest risk facing bank noncompliance.
Imprisonment is the most significant threat.
Indeed, the ex-CEO of Swedbank was recently sentenced to 15 years behind bars for her mishandling of company AML protocols.
When it comes to anti-money laundering regulations, the stakes could not be higher.
UniTeller: Your Global Payment Gateway
When it comes to cross-border payments, security is worth its weight in gold.
That’s why UniTeller ranks among the world’s most trusted payment gateways.
After all, our platform fuels cross-border payments in over 70 currencies, more than 105 countries, and over 200,000 payment points (for cash pickup).
Plus, our network instantly unlocks real-time payments with a single API. That’s why our network pays out over $17 billion in total volume every single year.
P2P. B2C.C2B. B2B. We do it all.
With UniTeller, you can turn your business into a global paying powerhouse. Explore our product suite to see which payment solution is right for you.
