4 steps for effective anti-money laundering compliance training

Although it is certainly not a new phenomenon, money laundering has become one of the most prevalent crimes of our time. The United Nations Office on Drugs and Crime estimates that the amount of money laundered globally in one year is 2 to 5% of global GDP—or the equivalent of $800 billion to $2 trillion U.S. dollars. Due to the clandestine nature of money laundering, it is difficult to fully estimate the total amount of money that goes through the laundering cycle. So it should be no surprise that training focused on anti-money laundering (AML) is a constant priority for many organizations—and that the level of vigilance required to prevent laundering grows by the day.   

In 2020 alone, banks worldwide amassed more than $15 billion in fines. U.S. banks accounted for 73% (or $11 billion) of those anti-money laundering fines, emanating from just 12 cases. That year, Goldman Sachs paid a record $2.9 billion anti-money laundering fine to regulators to resolve probes into its central role in the international 1MDB bribery scheme. Before 2020, Goldman Sachs had never pleaded guilty in any financial crime investigation. The fine became not only the first for the investment bank, but also the biggest in U.S. history. This illustrates just how severe the consequences of money laundering can be for any business that engages in it. 

Despite advances in technology and advanced security measures, organizations of all sizes are at risk. The problems they face are exacerbated by a number of factors: 

• Ongoing scandals mean that even fully compliant companies are under intense scrutiny, so they constantly need to increase anti-money laundering measures. 
• Multinational companies, in particular, are falling under the spotlight for their financial practices. Their ability to quickly and easily move funds from one jurisdiction to another is an obvious reason for this concern.
• International banks have been fined billions of dollars for non-compliance, including failure to identify and declare sources of funds. This has led to a change of attitude toward some banks, and the time is fast approaching where financial institutions are going to be treated as “guilty until proven innocent.” 

What is anti-money laundering, and why does it matter? 

Investopedia defines money laundering as the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from the criminal activity is considered dirty, and the process “launders” it to make it look clean. 

By contrast, anti-money laundering (AML) refers to the laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. These initiatives require financial institutions to monitor customers' transactions and report on suspicious financial activity. AML laws and regulations target criminal activities including market manipulation, trade in illegal goods, corruption of public funds, and tax evasion, as well as the methods used to conceal these crimes and the money derived from them.  

Criminals are constantly creating new ways to launder money. In response to this, new financial technologies (fintech) and cybercrime regulations are evolving to detect these actions—including both intentional and unintentional infringement of financial legal systems. Increasing regulations and new compliance laws affect every industry, especially banking and financial services, and soon: real estate. Anti-money laundering training, often shared through an ethics and compliance team, is an essential component to AML initiatives. 

4 steps to effective anti-money laundering compliance training 

One of the most effective ways to protect your business and ramp up organizational efforts to combat money laundering on a larger scale is to implement quality anti-money laundering training. Below are four steps you can take to ensure your compliance training supports your AML strategy. 

• Make your AML training mandatory for all employees. Anti-money laundering training should be extended to all employees across your organization.The reason why is because anybody can be either (a) the source (willingly or unwillingly) or (b) the discoverer of money laundering activities within the company.
  
• Ensure your training is current. Because regulations and laws are changing all the time, it is essential that your AML compliance training is up-to-date with current legislation. In order to fight money laundering effectively, your employees must have the right information and be aware of current AML laws. To get started, here is an overview of the latest anti-money laundering guidance from the Financial Industry Regulatory Authority (FINRA).

Money laundering is a very sophisticated crime and we must be equally sophisticated. —Janet Reno, while serving as Attorney General of the United States from 1993 to 2001   

• Choose an engaging method of compliance training. When choosing a method of training, you need to first figure out what messages you are trying to get across and how they might resonate with your audience of employees. Ask yourself: what type of work do your employees do? Are they field-based or office-based? Would they appreciate short training modules taken over time as opposed to one full session of training? The answers to questions like these should dictate the type of training you choose. A growing number of organizations are using a combination of traditional classroom training and new media technologies to create interactive corporate training. We have some tips on how to make training more engaging in this e-book.    
• Focus the training on the practical application. The primary goal of your AML training (as with any training) is to get your employees to apply the knowledge and skills they’ve learned in their training to their jobs. Anti-money laundering is all about being proactive and alert so that the instances of the crime are detected and eliminated swiftly. Your training should encourage employees to be responsible, vigilant, and timely to act whenever they suspect money laundering is happening. Recent research shows that when it comes to reporting misconduct of any kind, most employees who see something, say something. According to the LRN Benchmark of Ethical Culture, almost 40% of respondents said that they’ve observed misconduct or unethical behavior in the past year—with more than 80% of those that witnessed misconduct then reporting their observation. While this is encouraging news, it’s important to note that nearly 20% of employees didn’t report their observation, posing a significant legal and reputational risk for their companies and raising questions about the health of their organizational culture. The costs of not reporting—in this case, instances of money laundering—are significant.

The key takeaway 

When structured with purpose (using the four tips above), AML training can effectively help detect and report suspicious activity in your organization—including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation. You can explore our anti-money laundering course and other effective compliance training material with a free trial here.