The stages the controls aim at
- Placement: criminal cash first enters the system, often split into smaller deposits or converted into instruments that draw less attention.
- Layering: the funds move through accounts, jurisdictions and entities to break the trail back to where they came from.
- Integration: the money reappears as apparently clean wealth, invested in property, businesses or financial assets.
From standard to programme
The FATF, an intergovernmental body, sets the standard in its Recommendations. They began as forty measures spanning criminal justice, financial regulation and cross-border co-operation, and the current text also covers terrorist financing and the financing of proliferation; countries are assessed against them in mutual evaluations. For a regulated firm they translate into a recognisable programme: a business-wide risk assessment; customer due diligence scaled to risk, with enhanced checks for politically exposed persons and higher-risk countries; identifying the beneficial owners behind companies and trusts; ongoing monitoring; record keeping; and reporting suspicion to the national financial intelligence unit.
Technology has changed the work more than the principles. Sanctions screening and transaction alerts are increasingly automated, and the hard craft is tuning them so analysts see real risk without drowning in false positives. The FATF's guidance on financial inclusion warns that rigid identity requirements can shut out people who lack standard documents, such as refugees, which is the argument for simplified due diligence where risk is low. AML is a core strand of financial risk and compliance, and it binds payment firms in banking, fintech and payments, including open banking providers, whose onboarding also leans on strong authentication.