An AML policy is a formal document that outlines an organization’s approach to preventing, detecting, and responding to money laundering and related financial crimes. It serves as the foundation of a firm’s anti-money laundering (AML) program, defining responsibilities, risk tolerances, control procedures, and regulatory obligations.

In most jurisdictions, having a written and regularly updated AML policy is not just best practice, it’s a legal requirement. A strong AML policy enables internal alignment, improves audit readiness, and helps institutions stay compliant with evolving regulations such as the Anti-Money Laundering Act (AMLA) and global FATF Recommendations.

Why an AML Policy Is Essential

An AML policy sets the tone for compliance. Without one, financial institutions risk inconsistent practices, unclear responsibilities, and regulatory exposure. The policy acts as a blueprint for how the firm detects suspicious activity, screens customers, files reports, and trains staff.

Regulators view the AML policy as a key indicator of a firm’s commitment to fighting financial crime. A poorly written or outdated policy can lead to failed AML Audits, penalties, or license issues. It also helps internal teams, from onboarding to investigations, align around standard processes and escalation paths.

Key Elements of an AML Policy

A comprehensive AML policy typically includes the following components:

1. Regulatory Framework and Scope

Outlines which jurisdictions the institution operates in and which laws it complies with, such as the USA PATRIOT Act, the EU’s AML directives, or the UK’s MLRs.

2. Roles and Responsibilities

Defines who is responsible for what. This includes the AML Compliance Officer, senior management, and operational teams.

3. Risk-Based Approach

Describes how the institution segments customers, products, and geographies by risk, and how it adjusts controls accordingly. See Risk-Based Approach (RBA) for more.

4. Customer Due Diligence (CDD)

Explains onboarding requirements, Know Your Customer (KYC) processes, and when to apply Enhanced Due Diligence (EDD).

5. Screening and Monitoring

Details how the firm uses tools like FacctList and FacctShield to screen customers and transactions.

6. Suspicious Activity Reporting

Describes when and how to file SARs, and who within the organization is authorized to make that determination.

7. Training and Awareness

Outlines mandatory training for employees and refresh cycles to ensure awareness of red flags and new regulations.

8. Recordkeeping and Audit Trail

Specifies what records are retained, for how long, and how the firm maintains Audit Trails for regulators.

Who Should Create and Approve the AML Policy?

The AML policy should be created by the compliance team, often led by the AML Compliance Officer, in collaboration with senior risk and legal stakeholders.

Once drafted, it must be reviewed and formally approved by the board or a designated governance committee.

In regulated markets, the policy must be:

• Reviewed at least annually

• Updated for regulatory changes

• Tailored to the institution’s size, structure, and risk profile

According to guidance published by the UK’s Financial Conduct Authority (FCA), AML policies must be proportionate, actionable, and embedded in daily operations, not just theoretical documents.

How AML Policies Support Real-World Compliance

A clear, well-structured AML policy supports operations across the customer lifecycle:

• Onboarding: Ensures consistent KYC and screening practices

• Investigations: Provides clear escalation paths for analysts

• Reporting: Defines SAR thresholds and responsibilities

• Audits: Offers documentation and control evidence

• Training: Clarifies role-specific obligations

It also enables automation through platforms like FacctView, where rule logic and escalation triggers can be configured based on policy thresholds.

Common Pitfalls in AML Policies

Many institutions run into trouble when their policies:

• Are overly generic and not tailored to their business

• Fail to reflect the actual systems and workflows in use

• Contain outdated legal references or stale risk assessments

• Lack clarity on responsibilities and escalation chains

• Don’t align with the company’s products, services, or delivery channels

For FinTech's or firms expanding across borders, ensuring that policies reflect multi-jurisdictional compliance is especially challenging.