Mandatory AML/CFT/CPF Checks for Financial Institutions and DNFBPs

January 2026 Issue No.139

Anti-Money Laundering/Countering the Financing of Terrorism/Countering Proliferation Financing (AML/CFT/CPF) checks are mandatory procedures used by regulated Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) to verify customers' identities and ensure that they are not moving illicit funds. These checks are the first line of defense against financial crimes including fraud and organized crime. Core Components of AML/CFT/CPF Checks Why are AML/CFT/CPF Checks Required? Effective AML/CFT/CPF Programs should rely on the following 1. FIs and DNFBPs must perform these checks to remain mechanisms for monitoring and screening: compliant with national legislation and international standards such as the Financial Action Task Force (FATF) Standards. 2. Non-compliance can lead to massive fines and other penalties such as suspension or revocation of licences.  Failing to conduct the necessary checks can leave the entity Know Your Customer (KYC): The initial process of collecting and vulnerable to reputational damage. verifying a customer's identity using government issued documents like a passport and proof of address verification (e.g., utility bills), date of birth and place of birth. Customer Due Diligence (CDD): Assessing the risk associated with a customer by understanding the nature of his/her business and source of funds. Enhanced Due Diligence (EDD): Stricter scrutiny for high-risk customers, such as those in jurisdictions with weak regulations or complex corporate structures. Sanctions and PEP Screening: Cross-referencing names against global sanctions lists (e.g., UN or OFAC) and identifying Politically Exposed Persons (PEPs)--individuals in prominent public roles who may be considered of higher risk for corruption. Adverse Media Checks: Scanning public news and social media for negative information linking a customer to criminal activity. Transaction Monitoring: Ongoing surveillance of account activity and customer behaviour to detect suspicious patterns, such as "structuring" (breaking large cash deposits into smaller amounts to avoid detection).

2026 AML/CFT/CPF Checks Real-Time Sanctions, PEP & Watchlist Screening

Screening against global sanctions lists, PEP databases and To meet the growing demands of 2026's regulatory landscape,

watchlists must run at onboarding and continuously thereafter, AML/CFT/CPF checks must be more comprehensive.

using a risk-based approach. Systems should use structured Weak or inadequate AML/CFT/CPF checks are no longer an option identifiers to raise match quality, maintain robust audit trails because the consequences can result in irreversible monetary, and reflect updates quickly when designations change. business, and reputational losses. These regulatory actions signal

that manual and outdated AML/CFT/CPF processes fail to protect AI-Assisted Monitoring & Continuous Screening

Regulated Entities (REs) from supervisory scrutiny, or customers AI-assisted monitoring and continuous screening represent a from fraud. shift from static, rule-based systems to dynamic, data-driven frameworks. This transformation enables FIs and DNFBPs to By 2026, regulatory expectations may require REs to replace move from reactive detection to proactive, real-time manual AML/CFT/CPF processes with automated, intelligence- prevention of financial crimes. driven systems that centralize data, ensure audit-ready transparency and give a view of the ownership structures with red flags. Core Technologies in AI Assisted AML/CFT/CPF Identity Verification & Risk Profiling

Automated AML/CFT/CPF checks must extend beyond Machine Learning (ML): Can utilize historical data to basic identity verification. recognize complex patterns and generalize them to new,

evolving scenarios. REs need to assess customer risk based on financial behaviour, geography, product, and delivery channels, and historical data. Anomaly Detection: Can be used to identify behaviours that

deviate from a customer's established norms, such as sudden Artificial Intelligence (AI)-enhanced risk profiling should offer spikes in transaction volume or unusual cross-border activity. transparent, explainable risk scores, so REs, auditors and regulators can trace why a customer is rated high, medium, or low. Profiles Natural Language Processing (NLP): Can be used should auto-recalculate in real time when any attribute changes, for adverse media screening and analyzing unstructured

with periodic review and frequency tied to a dynamic score rather data from news and social media to identify reputational risks. than fixed calendars. Generative AI (GenAI): Can assist compliance teams by Customer Due Diligence (CDD) and Enhanced Due Diligence

summarizing large datasets, drafting narratives for Suspicious (EDD) Activity Reports (SARs) and automating documentation.

Enhanced due diligence (EDD) must include deeper scrutiny for

high-risk customers, such as PEPs, adverse media with negative Scan the QR Code below after reading to test yourself! sentiment, higher-risk corridors, and complex corporate structures.

AML/CFT/CPF systems should be capable of providing a comprehensive risk review of an entity across areas like sanctions, PEPs, and adverse media to determine the right level of due diligence whether EDD or Simplified Due Diligence (SDD).

Decision tests include: categorizing PEPs by seniority and jurisdiction, grouping adverse media by category, language,

sentiment, and recency to reduce noise and linking findings clearly

for reviewers and regulators.

Beneficial Ownership Validation

With heightened requirements for Beneficial Ownership (BO) validation, AML/CFT/CPF systems must cross-check BOs against

international registries and continually validate ownership

structures beyond what is available in basic registry data. Source: Systems should display ownership networks, flag opacity, bearer shares, nominee roles, fast-flipping ownership and automatically AML Watcher, What AML Checks are Necessary in 2026? alert when a BO becomes sanctioned or appears in high-risk media. AML Checks Trends for 2026

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