anti-money laundering software (AML)

Anti-laundering systems filter customer data, classify it according to level of suspicion and inspect it for anomalies. Such anomalies would include any sudden and substantial increase in funds or a large withdrawal. In both the United States and Canada, all transactions of $10,000 or greater must be reported.

Smaller transactions that meet certain criteria may be also be flagged as suspicious. For example, a person who wants to avoid detection will sometimes deposit a large sum as multiple smaller sums within a brief period of time. That practice, known as "structuring," will also lead to flagged transactions. The software flags names that have been blacklisted and transactions involving countries that are thought to be hostile to the host nation. Once the software has mined data and flagged suspect transactions, it generates a report.

A human will investigate and evaluate flagged transactions. Often, when a flag is investigated, the customer involved can explain the transaction and the flag is dismissed. For example, a customer whose banking typically consists of regular weekly paycheck deposits and smaller withdrawals may suddenly deposit an unusually large sum of money. That transaction will be flagged. Upon examination, however, the deposit may turn out to be from the sale of a car or other property.

The U.S Treasury's Financial Crimes Enforcement Network researches almost five million suspicious activity reports a year. Wes Gill, enterprise risk manager for SAS Canada, estimates that $500-billion to $1.5-trillion (U.S.) is laundered, globally, on a yearly basis. Most of that money comes from drugs and organized crime.

Learn more about Bank Secrecy Act compliance and anti-money laundering training

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More resources from around the web: - The U.S. Commodity Futures Trading Association provides more information about anti-money laundering programs. - The SEC offers an anti-money laundering resource guide. - MIT's Technology Review reported on 'The Technology that Toppled Eliot Spitzer.'

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