Cross-border transactions introduce significant risks when it comes to financial crime. Money launderers, fraudsters, and sanctioned entities take advantage of regulatory gaps between countries to disguise illicit funds. This means AML compliance teams must take a proactive approach to monitoring and controlling these transactions.

Different jurisdictions have different AML laws, making compliance a complex task. The UK’s regulations may align with international standards set by the Financial Action Task Force (FATF), but other countries may have weaker frameworks. Some jurisdictions act as safe havens for financial crime due to lax enforcement, limited regulatory oversight, or banking secrecy laws. Compliance teams need to assess the risks of dealing with financial institutions or clients in high-risk countries and apply enhanced due diligence where necessary.

International sanctions also add another layer of complexity. Businesses must screen individuals against sanctions lists from multiple regulators, such as the UK’s Office of Financial Sanctions Implementation (OFSI), the US Office of Foreign Assets Control (OFAC), and the EU. A failure to block transactions involving sanctioned individuals or entities can lead to severe financial and reputational damage.

Cross-border transactions make it harder to verify who is actually behind a payment. Criminals often hide behind complex corporate structures, using offshore companies and nominee directors to distance themselves from illicit funds. This is why rigorous KYC procedures are critical. Verifying beneficial ownership – who ultimately controls a company or account – helps prevent criminals from using legitimate businesses as a front for money laundering.