The 3 Common Challenges of AML Compliance Work

1. Constantly Evolving AML Regulations

AML regulations are constantly updating to keep pace with the increasing sophistication of digital financial transactions. While this adaptability is necessary to combat emerging risks, it also turns compliance into an ongoing challenge for businesses.

For example, in February 2023 Plenary, FATF adopted revisions for Recommendation 25discusses beneficial ownership and transparency of legal arrangements, and introduced a risk-based approach for identifying beneficial ownership in these cases. Following this, a year after –  in March 2024, FATF released updated guidelines to help countries effectively implement these changes.

So, what does this mean for your business? 

This means that your AML policies must be regularly reviewed and adjusted as authorities frequently update their regulatory standards.

2. Varied Policies by Jurisdiction

AML regulations are already complex on their own, but the fact that they vary per jurisdiction adds to their complexity. Policies can change significantly across countries, which can be challenging for companies that are planning to expand or are operating internationally.

For instance, in response to legal challenges and a re-evaluation of regulatory burdens, FinCEN issued an interim final rule that dramatically narrowed the scope of the CTA. 

Ultimately, compliance that meets the standards in one country may not be the same in another. So, familiarity with both local and global AML frameworks and their specific distinctions is important in this complex industry

3. Complexity of Customer Due Diligence (CDD) and Know Your Customer (KYC) Processes

At the core of AML compliance are Customer Due Diligence (CDD) and Know Your Customer (KYC) procedures designed to verify the identity of clients and assess the risks they may pose. These processes can be time-consuming and complicated, especially when dealing with high-risk customers identified by region or industry.

For small enterprises, building a solid CDD and KYC process is often a balancing act. On one hand, they need to stay compliant with AML regulations, while on the other, they operate with lean teams where slowing down operations can be costly. 

Thorough checks can delay onboarding and frustrate clients, but cutting corners risks hefty fines and lasting reputational damage. It’s a trade-off between protecting your business from AML sanctions and keeping operations smooth and seamless.

• Building Trust with Stakeholders

You demonstrate that you take financial integrity seriously when your business consistently meets AML standards. This helps you earn the trust of key stakeholders—clients, investors, partners, and regulators alike. 

A client deciding between two similar service providers is more likely to go with the one that has secured, verifiable systems in place for preventing financial crimes.

• Making Operations Smoother and More Efficient

Building a compliance framework takes effort, but the work pays off by making your operations remarkably more efficient.

For instance, clear KYC processes mean fewer onboarding errors, while strong transaction monitoring systems reduce the risk of undetected suspicious activity. By standardizing internal policies and training, you also help your teams make consistent, informed decisions that keep operations running smoothly.

• Staying Prepared for Audits and Regulatory Checks

If you’ve kept your records tidy and maintained your compliance procedures, you’ll be in a much better place when unexpected regulatory checks happen.

Many companies run into issues not because of outright wrongdoing, but because they didn’t have the necessary documentation or processes to prove that they were doing the right thing. Staying ahead of AML compliance means you’re not just being compliant; it also means that you can demonstrate your compliance whenever necessary.