The American Association of Private Lenders urges private lenders to have an effective anti-money laundering program and supports efforts to prevent money laundering and associated crimes. Money Laundering is known as the process of making proceeds obtained illegally (also known as “dirty money”) appear legal (also known as “clean money”). Typically, there are three steps involved:

  • Placement: Illegal money is inserted into the regular financial system.
  • Layering: The funds are transferred or wired between other accounts to confuse people.
  • Integration: The “dirty money” is finally integrated into the financial system by further transactions, making it appear “clean.”

The 1970-founded Bank Secrecy Act has become one of the most crucial weapons in the battle against money laundering. Enforcing private lenders to comply with the anti-money laundering laws and requiring private lenders to establish an Anti-Money Laundering (AML) Program. The AML program of a private lender should be “risk-based.” This implies that the AML policies, practices, and internal controls of a private lender are to be created to address the risk of money laundering unique to the private lender’s line of work.

A private lender can be sure that its AML program is the best one for the company with the aid of this “risk assessment.” Here is how to create a risk assessment in seven steps.

  1. Create an AML Policy
  2. Assign an AML Compliance Officer
  3. Share AML information with relevant government bodies.
  4. Check the Office of Foreign Assets Control (OFAC) List for AML compliance requirements.
  5. Create a customer Identification program
  6. Establish a due diligence rule for your customers.
  7. Identify and report suspicious transactions.

Here are some possible red flags to note in mortgage loan transactions: Unusual requests from clients, hiding the actual beneficiary owner, and suspicious nature of the customer. To read more on Anti-Money Laundering, click here.

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