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Anti-Money Laundering (AML) checks definition and meaning | AML glossary

What are Anti-Money Laundering (AML) checks? Definition and AML compliance meaning.

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Anti-Money Laundering (AML) checks definition: What it means in AML compliance.

Anti-Money Laundering (AML) checks are the processes financial institutions and regulated businesses use to identify and prevent money laundering and financial crime. These checks involve verifying customer identities, assessing risk levels, monitoring risk profiles for suspicious activity, and reporting any concerns to the appropriate authorities.

AML checks form part of wider compliance obligations under regulations such as the UK’s Money Laundering Regulations (MLR) and international frameworks like the Financial Action Task Force (FATF) recommendations. They typically include Know Your Customer (KYC) and Know Your Business (KYB) procedures, sanctions screening, politically exposed persons (PEP) checks, and ongoing monitoring.

For compliance teams, AML checks help to detect individuals or entities attempting to conceal illicit funds within legitimate financial systems. If a customer or transaction raises red flags – such as inconsistent information, links to high-risk jurisdictions, or negative media reports – enhanced due diligence (EDD) may be required.

Failure to conduct effective AML checks can expose a business to regulatory penalties, legal risks, and reputational damage. By integrating automated screening tools with human oversight, organisations can improve their ability to identify suspicious activity while maintaining compliance with legal requirements.

“Financial institutions should be required to verify the identity of the customer and beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers.”

Financial Action Task Force (FATF)

International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation

Why Anti-Money Laundering (AML) checks matter for compliance teams.

For compliance teams, AML checks are a frontline defence against financial crime. These checks help identify and assess risks associated with customers, transactions, and business relationships, ensuring that illicit funds do not enter the financial system.

AML checks involve multiple layers of due diligence. At the onboarding stage, Know Your Customer (KYC) procedures verify identities and assess the risk level of new clients. Sanctions screening ensures customers are not linked to restricted entities, while politically exposed persons (PEP) checks flag individuals with heightened risk due to their public roles. Once a customer relationship is established, ongoing monitoring helps detect unusual patterns or changes in risk profiles that could indicate money laundering or other financial crimes.

Compliance teams play a critical role in interpreting the results of these checks. Not every flagged case is a sign of wrongdoing, so human judgment is essential in distinguishing genuine red flags from false positives. When potential risks arise, teams must decide whether to escalate the case for enhanced due diligence (EDD), report a suspicious activity to regulators, or even terminate a business relationship.

Regulatory expectations mean that AML checks must be consistent, well-documented, and regularly updated to reflect evolving risks. Compliance teams must also balance risk management with business needs, avoiding unnecessary de-risking while maintaining regulatory obligations. The use of technology – such as ongoing monitoring tools – helps process vast amounts of data efficiently, but automation alone is not enough. A strong compliance culture, staff training, and clear reporting procedures are just as important in ensuring AML checks are effective.

In short, AML checks give compliance teams the tools to protect their organisations from financial crime, regulatory breaches, and reputational damage. A well-executed AML strategy not only prevents illegal activity but also strengthens trust with regulators, customers, and business partners.

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