Learning Objectives:

  • Explain the AML/CFT framework and its key components.

  • Understand KYC, CDD, and EDD requirements.

  • Apply transaction monitoring and suspicious activity reporting.

5.1 The AML/CFT Framework

AML and CFT are critical regulatory requirements for financial institutions . The global standard is set by the Financial Action Task Force (FATF) through its 40 Recommendations . Key components of an effective AML compliance program, as outlined in the CAMS 2026 syllabus, include:

  • Risk-Based Approach: Enterprise-wide risk assessments and sector-specific vulnerability assessments .

  • Customer Due Diligence (CDD): Identifying and verifying customer identity and understanding the nature of the business relationship.

  • Enhanced Due Diligence (EDD): For high-risk clients (e.g., Politically Exposed Persons) .

  • Transaction Monitoring: Monitoring transactions for suspicious patterns and red flags.

  • Suspicious Activity Reporting (SAR/STR): Filing reports with Financial Intelligence Units (FIUs) .

5.2 KYC and Customer Due Diligence

Know Your Customer (KYC) is the process of verifying customer identity and assessing risk . The AML/CFT compliance process, as outlined in the Koenig compliance training, includes :

  • Customer Identification Program (CIP): Collecting and verifying basic identifying information.

  • Beneficial Ownership Identification: Identifying the individuals who ultimately own or control legal entities .

  • Risk Profiling: Categorising customers as low, medium, or high risk.

  • Ongoing Monitoring: Continuously reviewing transactions and updating customer information.

5.3 The Stages of Money Laundering

The CAMS syllabus identifies the three stages of money laundering :

  1. Placement: Introducing illicit funds into the financial system.

  2. Layering: Concealing the source of funds through complex transactions.

  3. Integration: Making the funds appear legitimate.

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