What is anti-money laundering (AML)?

Anti-Money Laundering (AML) refers to the comprehensive framework of laws, regulations, policies, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. The modern AML framework operates at international, regional, and national levels, with the Financial Action Task Force (FATF) setting the global standard through its 40 Recommendations.

The three stages of money laundering

Money laundering is usually described in three stages, though in practice they often overlap.

Placement

The initial introduction of criminal proceeds into the financial system. This is the stage where cash-intensive businesses - including high-value goods dealers and precious metals traders - are most vulnerable, as they may receive large cash payments.

Layering

The process of separating criminal funds from their source through complex layers of transactions. Trust and company service providers face particular risk here, as shell companies and complex ownership structures can be used to obscure the audit trail.

Integration

The final stage where laundered funds re-enter the legitimate economy. Real estate is one of the most common integration vehicles, with the UK National Risk Assessment identifying property purchases as a high-risk channel.

AML obligations for non-financial institutions

Under the FATF framework and national legislation such as the UK Money Laundering Regulations 2017, designated non-financial businesses and professions (DNFBPs) are subject to the same core obligations as financial institutions: customer due diligence, sanctions screening, suspicious activity reporting, and record-keeping.

FirmScreen provides automated sanctions screening designed specifically for these obligations, with proportionate pricing and complete audit trails.

Related terms

  • Customer Due Diligence (CDD) - the process of verifying customer identity and assessing risk
  • Enhanced Due Diligence (EDD) - additional checks for higher-risk customers
  • FATF - the global standard-setting body for AML
  • SAR - suspicious activity reports filed with the relevant FIU
  • MLRO - the officer responsible for AML compliance within a firm