What is money laundering?

Money Laundering is the process of turning illegitimately obtained property into seemingly legitimate property. It includes concealing or disguising the nature, source, location, disposition, or movement of the proceeds of a crime. Money Laundering is prohibited in Uganda and is criminalised.

In Uganda, for example, the most proceeds-generating predicate offences are corruption, fraud (that includes cybercrime, obtaining money by false pretenses, visa fraud, identity theft and pyramid schemes), tax crimes (tax evasion and fraud), and counterfeiting of goods. Overall, the money laundering threat for Uganda is assessed as Medium-High while overall money laundering is assessed as medium by the authorities of Uganda.

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What is anti-money laundering (AML) screening

In the financial sector, screening refers to the process of carrying out extra due diligence checks to confirm that your customer is not associated with financial crimes such as money laundering, terrorism financing, or adverse media mentions that are predicate offences to money laundering.

Screening is only possible once you have enough KYC documents submitted. The data is run through a database with lists from OFAC, the UN, the EU, the UK, and even specific country lists to ensure that no bad actors are attempting to onboard on the platform.

Why AML screening matters?

With financial services institutions now both responsible and accountable for catching perpetrators of money laundering, traditional rules-based detection is not enough. With criminal actors actively evolving their strategies to avoid detection, financial institutions need to be highly adaptable.

Financial institutions like banks, insurance companies and micro-finance organizations need to invest in a substantial anti-money laundering (AML) technologies to catch criminals, to meet compliance requirements, and to avoid the heavy penalties for failing to do so. AML screening helps financial institutions in Africa in the following ways:

Comply with local and global regulations

All financial institutions are obligated by law to have strong AML programs in place to comply with the various anti-money laundering regulations and requirements in all their jurisdictions of operations. Failure to comply with these requirements could result in legal action being taken against the organisation and financial losses, including fines, loss of license, and reputation damage.

Prevent financial crimes

As earlier mentioned on the importance of KYC, screening aids in the prevention of financial crimes such as money laundering, terrorism financing, and other illicit activities. Financial institutions help disrupt criminal networks by identifying and reporting all suspicious activities to regulators for further action.

Protect customers and stakeholders

Screening protects existing and potential customers and stakeholders by reducing financial crime risk. As mentioned earlier, non-compliance could result in heavy fines and penalties against the organization, which could even lead to the liquidation of the organisation. As a result, the liquidation may affect innocent customers.

Protect own reputation and assets

Any financial institutions suspected of or associated with money laundering, terrorism financing, and all other illicit activities can suffer serious reputational damage. Consequently, business opportunities are lost, the confidence levels of investors drop, and the cost of attracting and retaining existing customers goes up significantly. The financial institution could even shut down in severe cases.

AML screening is continuous and technically challenging

According to a 2020 survey report from Deloitte, reliance on manual processes and poor quality and/or inadequate data were among the top challenges for banks when managing an AML compliance programme.

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62% of the respondents indicated that insufficient/outdated technology to manage AML compliance obligations was the biggest AML compliance challenge. This corresponds to what digital KYC and KYB companies like Laboremus Uganda see as major challenges in the market regarding AML driven KYC and KYB practices:

• How to handle the trade-off between compliance and acquisition rates?
• How to use an accurate and reliable solution that limits the amount of manual work and reduces costs?
• How to create a compliant solution that adapts to local best practices and international requirements?
• How to manage multiple technology suppliers that deliver “a piece to the puzzle” of AML compliance and KYC/KYB activities but lack overall cohesiveness required for the bank.

How digital, automated AML screening is more reliable

In a follow-up survey in 2022, Deloitte reported that leaders working in compliance believe that technology and advanced analytics will improve the effectiveness of AML screening in the future.

Use of advanced analytics to improve money laundering detection is viewed as main innovation. Advanced analytics, particularly AI, is seen as a way to speed up customer and transaction reviews.

Deploying a digital automated AML screening tool, which utilises data analytics and artificial intelligence, offers several significant advantages for comprehensive AML verification work and compliance.

Ongoing real-time monitoring

Sophisticated AML platforms provide continuous, real-time monitoring of customer activities and transactions. This is crucial for quickly identifying any unusual or potentially suspicious behaviour, ensuring timely intervention.

Fewer false positives

Automated algorithms and machine learning techniques help in reducing the number of false positive results. Accurate identification helps with efficient resource allocation and maintaining operational effectiveness.

Access to global databases and lists

Automated tools connect to a wide array of global databases and watchlists, ensuring a thorough screening process ensuring comprehensive AML compliance.

Always up to date on AML regulation changes

Digital AML tools are constantly updated to reflect the changes in AML regulations and practices for weeding out financial fraud and crime. This helps financial institutions stay ahead of criminals in a constantly evolving environment of financial crimes.

Quicker customer onboarding

Automated compliance and verification tools streamline the onboarding process and significantly reduce the time it takes to qualify new customers. This efficiency leads to a better customer experience, as it minimises delays and frustrations historically associated with the verification process.

Cost-effective

By automating AML screening and other verification processes, automated platforms reduce the need for extensive manual labor, making it a more cost-effective solution. This efficiency not only saves money but also allows resources to be allocated to other critical areas of the business. There is also minimal paperwork involved which boosts the operations efficiency of a financial institution.

Digital, automated AML screening technology offers benefits such as real-time monitoring, fewer false positive results, access to extensive global databases, and staying updated on the latest AML regulations.

Modern platforms like Streamline by Laboremus facilitate quicker customer onboarding, enhance the overall customer experience and provide a cost-effective compliance solution.

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Laboremus is leading the change towards digital banking in Africa

Streamline by Laboremus helps you acquire customers faster ​with reliable KYC / KYB​ and digital customer onboarding. Onboard customers in minutes by automating KYC checks and digitally establishing customer identity​ and running deep customer due diligence.

Laboremus is creating a safe, reliable digital infrastructure for financial inclusion in Africa

Partnerships with Government Organisations makes Laboremus the most reliable identity verification and onboarding platform​ in Africa. Streamline by Laboremus powered AML/PEP verification is used by leading banks in Africa.

In Uganda, Laboremus is used by over 40 financial institutions and is trusted by Bank of Uganda and Uganda Bankers Association.

For more information on Streamline by Laboremus and our digital KYC, KYB and customer onboarding solutions, please visit www.laboremus.ug. You can also connect with one of our product experts to understand how you can automate customer due diligence and onboarding for your organisation.