AML Compliance Program: core requirements, key pillars, and regulatory expectations
- azakaw
- Nov 3, 2025
- 11 min read
Updated: 4 days ago
An ineffective AML compliance program is no longer seen as a paperwork issue; it is treated as a failure of governance. Regulators now expect institutions to actively monitor risks, test controls, and clearly justify past decisions.
The solution is a well-designed AML compliance program that goes beyond policies and demonstrates real, ongoing effectiveness. Understanding how regulators assess these programmes is critical to staying compliant.
This article explains what an AML compliance program is, how it has evolved, how it is evaluated, and what institutions should focus on to withstand regulatory reviews.
What's an AML Compliance Program?
An AML compliance program is a structured framework that enables regulated institutions to prevent, detect, and report money laundering and terrorist financing in line with applicable laws and regulations.
It integrates core controls such as Knowing Your Customer (KYC) and Know Your Business (KYB), transaction monitoring, suspicious activity reporting, internal governance, etc.
Modern AML compliance programs are based on an AML Risk-Based Approach, which means controls should match the level of risk for money laundering and terrorist money from customers, products, how things are delivered, and where things are happening.
This is a must under Recommendation 1 of the Financial Action Task Force, which requires institutions to identify, assess, and mitigate risk on an ongoing basis rather than relying on static controls (FATF, International Standards on Combating Money Laundering and the Financing of Terrorism, 2025).
Why are AML compliance programs needed?
AML compliance programs are not merely formal regulatory requirements; they serve multiple functions that are fundamental to the ability of financial and non-financial entities to operate in regulated markets.
Legal and supervisory mandate
Obliged entities are required by law to implement AML frameworks that prevent, detect, and report money laundering and terrorist financing.
In most jurisdictions, maintaining an AML program is a condition for authorisation and continued operation.
Risk management and crime prevention
Effective AML programs help firms identify unusual patterns, disrupt illicit financial flows, and reduce exposure to sanctions, fraud, and criminal liability.
Without a structured AML framework, institutions cannot distinguish legitimate from illicit activity at scale.
Business continuity and market access
Access to correspondent banking, payment infrastructure, and licensing regimes increasingly depends on demonstrable AML capabilities.
Our experience shows that weak AML controls jeopardise key relationships, raise de-risking concerns, and can result in onboarding refusal by partners.
Regulatory enforcement and penalties
Supervisors continue to penalise institutions with weak AML programs.
Consequences can include:
Multi-year remediation plans;
Business restrictions;
Financial penalties;
Criminal liability for senior management.
Reputational and commercial resilience
Customers, investors, and counterparties conduct due diligence on AML programs during onboarding, audits, and M&A transactions.
Institutions that cannot evidence robust AML governance face higher operating friction, increased compliance costs, and reputational risk.
Who needs to have an AML program?
AML programs are required for all financial institutions, fintech firms, and crypto-asset service providers, as well as certain Designated Non-Financial Businesses and Professions when their activities expose them to heightened money-laundering risk.
While it changes based on where you are and what you do, entities are expected to have an AML compliance program according to their risk as a must for being allowed and staying open.
What are the 5 pillars of an AML compliance program?
The five pillars that make an AML compliance program strong are:
Written policies and internal procedures
Define how AML obligations are translated into day-to-day operations, making supervision and escalation traceable rather than informal.
Appointment of an AML compliance officer
Assigns accountability and decision-making authority, including responsibility for reporting, remediation, and interaction with regulators.
To be a successful AML compliance officer, the person must have AML certifications, expert knowledge of regulatory data sources, compliance analysis tools, and demonstrate expertise in relevant regulations.
In addition, a compliance officer needs experience in the financial sector, preferably in AML compliance, legal, or internal risk audits.
Ongoing employee training
AML training ensures the people making risk-sensitive decisions understand when to escalate, what to document, and what constitutes suspicious activity.
Without effective training, AML controls fail at the point of execution, regardless of how well policies are written.
Related content: The best AML training for accountants
Independent audit and programme testing
Validates whether AML controls are functioning as designed and whether remediation efforts close gaps in practice rather than on paper.
Effective testing goes beyond reviewing policies and examines sampling, escalation behaviour, data integrity, and decision-making logic to determine if controls work under real operating conditions.
Where deficiencies are identified, testing must trigger documented remediation with clear ownership, timelines, and verification of outcomes.
Transaction monitoring and suspicious activity reporting
Links detection of unusual activity with mandatory reporting obligations, ensuring that potential money laundering or terrorist financing patterns are identified, reviewed, and escalated within regulatory timelines.
Transaction monitoring is assessed not only on alert generation but also on alert quality, investigative documentation, reviewer judgment, and the timeliness and narrative strength of Suspicious Activity Reports (SARs).
In modern supervision, the focus has shifted toward whether monitoring outputs support defensible decisions, whether escalations are consistent, and whether SARs contribute meaningful intelligence to competent authorities.
What are the core elements to include in an AML compliance program?
The core elements typically expected within an AML compliance programme include:
Enhanced Due Diligence (EDD) for higher-risk customers
AML screening
Recordkeeping and documentation
Case management and reporting tools
Alongside the high-level structure of an AML compliance program, regulators pay close attention to the AML programme components, i.e., operational components that drive how risk is handled in practice.
These elements shape what happens at onboarding, how activity is reviewed, and how decisions are recorded once issues arise.
During supervisory reviews, shortcomings tend to surface where these components operate in isolation or where they fail to support clear, defensible judgment over time.
Customer Due Diligence (CDD)
CDD establishes the baseline understanding of a customer’s profile, risk, and expected activity at onboarding.
It verifies identity, legal formation (for entities), beneficial ownership, and the nature and purpose of the relationship so that monitoring systems have an informed benchmark.
Supervisors increasingly assess whether CDD information is accurate, up to date, and relevant to how risk is managed throughout the customer lifecycle, rather than treated as a one-off documentation exercise.
Related content: What is customer risk rating?
Enhanced Due Diligence (EDD)
Applies deeper scrutiny where the ML/TF risk profile warrants heightened inspection.
EDD typically involves source of funds/wealth verification, adverse media review, enhanced screening, senior-level approval, and more frequent periodic reviews.
Regulatory expectations focus on whether EDD results in a meaningful behaviour change, not just additional documentation.
If nothing changes, once a customer is classified as a high-risk customer, supervisors will question whether the classification has operational weight.
AML screening
AML screening detects exposure to sanctioned individuals, entities, vessels, and jurisdictions as well as politically exposed persons (PEPs), their relatives, and close associates.
Screening controls must address both onboarding and ongoing activity, reflecting changes in sanctions lists and real-world risk events.
TIP: Read our ultimate guide to learn everything you need about AML screening
Recordkeeping and documentation
Preserves the evidentiary chain required for supervisory review and investigation.
Regulators expect firms to be able to reconstruct why a decision was made, who made it, what data was considered, and when escalations occurred without relying on individual memory.
Recordkeeping underpins the entire AML framework: without traceability, institutions cannot demonstrate compliance even where controls exist.
Case management and reporting tools
Provide structured environments for investigations, escalations, and Suspicious Activity Report (SAR) preparation.
Effective case management ensures timelines, decision rationale, supporting evidence, and handoffs between teams are captured in a way that withstands audit and regulatory scrutiny.
As supervisors increasingly assess SAR quality and decision consistency, case management systems play a central role in reconciling detection, analysis, and reporting obligations across jurisdictions.
Global regulatory frameworks
Anti-money laundering supervision is not uniform across jurisdictions. While the underlying objectives are aligned, regulators differ in how requirements are interpreted, enforced, and operationalised.
Institutions operating cross-border must therefore align their AML programmes not only with statutory obligations, but also with supervisory expectations and enforcement practices in each jurisdiction.
FATF Recommendations
The Financial Action Task Force sets the global baseline for AML/CFT through its 40 Recommendations, which inform national legislation, supervisory methodologies, and mutual evaluations.
FATF establishes the risk-based approach as the organising principle for modern AML programmes.
6AMLD (European Union)
The 6th Anti-Money Laundering Directive harmonises criminal liability, expands the list of predicate offences, and strengthens cross-border investigative cooperation among EU Member States.
The directive increases accountability for legal persons and introduces tougher penalties for failure to prevent money laundering.
FinCEN and the Bank Secrecy Act (USA)
In the United States, AML compliance is enforced under the Bank Secrecy Act and implemented by FinCEN.
Supervisory attention focuses on governance, the effectiveness of transaction monitoring systems, and the quality and timeliness of Suspicious Activity Reports (SARs).
MAS (Singapore), DFSA (UAE), FCA (UK)
Monetary Authority of Singapore (MAS) puts focus on board responsibility and owning risk (MAS Notice 626, 2025)
Dubai Financial Services Authority (DFSA) focuses on risk across borders and punishment risks (DFSA AML Module, 2025)
Financial Conduct Authority (FCA) focuses on AML governance, resourcing adequacy, data quality, and remediation effectiveness in the UK(FCA Financial Crime Guide, 2025)
How to build an AML Compliance Program
This part explains how to build an AML compliance plan that can stand up to being checked by supervisors and regulators across jurisdictions.
Conduct a business-wide risk assessment: Identify relevant AML risk across customers, products, delivery channels, and jurisdictions.
Establish policy and governance framework: Document roles, escalation paths, reporting lines, and executive accountability.
Design controls proportionate to risk: Translate risk into onboarding, CDD, EDD, screening, and monitoring requirements.
Map data, systems, and workflows: Ensure monitoring, screening, case management, and reporting can operate coherently.
Implement investigation and SAR/STR processes: Define how alerts become investigations and how cases become regulatory filings.
Allocate resources and competencies: Staff first-line, second-line, and audit functions with training aligned to exposure.
Test and remediate control effectiveness: Use independent testing to validate operation and verify remediation.
Review and adapt as the business evolves: Adjust controls to reflect new products, markets, typologies, and regulatory expectations.
Read also: Inherent vs residual risk
How to operate an AML program effectively
Best practice | Operational approach | Field-level tip |
Start with accountability, not controls | Assign ownership of the AML compliance programme at the senior level and document how unresolved issues are escalated. | During inspections, supervisors often ask who makes the final call when compliance and the business disagree. If the answer is unclear, governance will be questioned. |
Base the programme on how the business actually operates | Develop a business-wide risk assessment that reflects real customer journeys, transaction flows, and decision points. | If the risk assessment has not been revisited since a new product, market, or delivery channel was introduced, expect it to be challenged. |
Turn risk understanding into usable controls | Define how different risk levels affect onboarding decisions and review expectations in practice. | Controls that are routinely bypassed through informal workarounds are treated as ineffective, even if they are documented. |
Treat KYC and CDD as the start of a relationship | Design onboarding so that customer information feeds into monitoring and review later on. | If investigators have to re-collect basic customer data during a case review, onboarding is not supporting the rest of the program. |
Be explicit about what changes when risk increases | Define what Enhanced Due Diligence actually changes once a customer is classified as higher risk. | Inspectors look for behavioural differences. If approval, review frequency, or scrutiny does not change, the risk classification will be questioned. |
Govern screening decisions, not just the tools | Set clear rules for how sanctions and PEP screening alerts are reviewed and documented. | If two reviewers can reach different conclusions on the same screening alert without escalation, governance is too weak. |
Make transaction monitoring explainable | Implement monitoring logic that reviewers can understand and articulate when challenged. | “The system flagged it” is not an acceptable explanation during an inspection. Investigators are expected to understand the rationale. |
Standardise how investigations are handled | Define minimum documentation standards for investigations and closure decisions. | Cases closed with limited rationale are often selected for deep-dive review by supervisors. |
Design recordkeeping with hindsight in mind | Ensure records allow decisions to be reconstructed without relying on individual memory. | Assume the person explaining the case later will not be the person who handled it. |
Train people according to exposure | Align training content with the decisions staff actually make in their roles. | If frontline staff cannot explain when to escalate without checking guidance, training has not landed. |
Test whether the programme works, then act | Use independent testing or an internal audit to assess how controls operate in practice. | Repeated findings on the same issue signal ineffective remediation, even if action plans exist. |
Keep the programme under review | Set a review cycle and update the programme as the business and regulatory landscape changes. | Programs often fail between inspections. Internal challenge is cheaper than regulatory remediation. |
Common challenges when building AML programs
Staying compliant across jurisdictions
Operating across multiple jurisdictions introduces complexity that is difficult to manage through localised controls alone.
While international standards provide a common baseline, national regulators interpret and enforce requirements differently.
Companies often struggle to maintain consistency without overcomplicating their frameworks or creating gaps between local practice and group-level oversight.
Managing data from multiple systems
AML programs depend heavily on data, yet many organisations still rely on systems that were never designed to work together.
When information is spread across different tools and teams, forming a reliable picture of risk becomes difficult.
Supervisors increasingly focus on whether firms can explain how relevant information is combined when decisions are taken.
Reducing false positives from alerts
Alert volumes remain a persistent issue, particularly where monitoring rules are not well aligned with actual risk.
Excessive false positives can overwhelm teams and reduce review quality, while poorly calibrated systems risk missing genuinely suspicious activity.
Regulators now look beyond alert counts and focus on whether monitoring outputs support sound judgment.
Keeping up with regulatory updates
AML requirements continue to evolve, with changes often driven by enforcement outcomes rather than formal rulemaking.
Firms frequently underestimate the effort required to interpret new guidance and translate it into operational change.
As of 2026, supervisors expect institutions to demonstrate awareness of regulatory developments and to show how their AML programs are adjusted in response.
How tech can strengthen AML compliance program
Modern AML compliance largely relies on AML compliance software, particularly when institutions and companies need to maintain oversight and evidentiary continuity across multiple jurisdictions.
Our expertise and experience say that supervisors are less interested in which systems are in place and more concerned with whether an institution can explain how activity is handled in the event of an error.
Tools built for AML oversight are intended to support that explanation by preserving context as work progresses. This matters most for firms operating across jurisdictions, where supervisory reviews often focus on whether records remain coherent over time.
End-to-End AML Compliance Software
Manage multiple jurisdictions and reduce false positives with a platform that provides a structured environment in which AML activity and related documentation can be examined as part of a single framework.
Frequently Asked Questions (FAQs)
What are the five things that make up an AML compliance program?
The five core pillars of an Anti-Money Laundering (AML) compliance programme are: internal policies, procedures, and controls; a designated compliance officer; ongoing employee training; independent internal AML audit/testing; and customer due diligence (CDD).
How often should an AML program be reviewed?
At least annually and whenever there are material changes in regulation, risk profile, or business model.
Who's responsible for keeping up AML compliance?
Ultimate responsibility rests with senior management and the board, supported by the AML compliance officer.
What's the difference between AML and KYC?
AML (Anti-Money Laundering) is the overall legal framework for fighting financial crime, while KYC (Know Your Customer) is the specific process used within that framework to identify and verify customers during onboarding and throughout their relationship with the firm.
Conclusion
An AML compliance program is now judged by how it holds up over time rather than how it's described on paper.
Those in charge (regulators) focus on whether controls continue to function as business activity evolves and whether past decisions remain defensible when reviewed later.
Maintaining effectiveness, therefore, depends on regular reassessment and adjustment, not periodic fixes.
Institutions that treat AML compliance programs as an ongoing governance responsibility, rather than a static obligation, are generally better positioned to withstand sustained supervisory scrutiny.
Technology often sits quietly in the background of this process. Platforms such as azakaw are designed to support AML programs by providing structure around how monitoring activity and related decisions are recorded and reviewed.
For organisations examining how their AML frameworks operate in practice, understanding how tools like this are used forms part of that wider assessment.
Key takeaways about the AML compliance program |
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