Financial Institutions: Internal Controls and AML Practices

Anti-money laundering (AML) regulations aim to punish criminal offenses and safeguard the economy from illicit activities by regulating financial institutions. These regulations combat money laundering, involving stages like placement, layering, and integration, as discussed by Sullivan (2024). Internal controls and AML procedures are crucial for financial institutions to maintain integrity, comply with regulations, and mitigate risks, ensuring trust among stakeholders. The purpose of the study is to evaluate the efficiency of AML procedures and internal controls, addressing challenges, best practices, and recent developments. AML procedures and internal controls share the goal of ensuring the accuracy of financial information, with the study drawing from various sources to comprehensively analyze practices across different jurisdictions and provide insights for stakeholders and regulatory bodies. The study's demographic breakdown revealed that due to limitations in participant selection, 30 participants exclusively from the banking sector were included. Despite privacy concerns, confidentiality was assured, yet some institutions restricted access to the survey. Key findings from the AML results highlighted challenges such as insufficiently trained staff and outdated technology, emphasizing the need for ongoing education and investment in advanced systems. Participants stressed the importance of AML training initiatives and risk management improvements, with a majority reporting written policies and monitoring mechanisms in place. Data analytics emerged as a potential area for innovation, along with enhanced information sharing between financial intelligence units. Internal controls findings indicated a focus on customer due diligence and early transaction screening, with automation levels varying among respondents. Major causes of control issues included IT deficiencies, staff competence, and inflexible controls, with technology and ongoing training cited as solutions. Interviews with banking professionals underscored the importance of AML protocols, ongoing training, and risk assessment in detecting and preventing money laundering activities within financial institutions, highlighting the need for continuous improvement and regulatory compliance.