The Anti-Money Laundering Act Explained in 10 Minutes
The Anti-Money Laundering Act Explained in 10 Minutes
The Anti-Money Laundering Act. Just the word makes many sigh deeply. But actually, the basic principles are simple once you understand what it's all about. Let's cut through legal jargon and explain it so even your grandmother would understand.
Why Does the AML Act Exist?
Imagine a bank robber with a bag full of cash. He can't just walk into a Ferrari dealership and buy a car - that would raise eyebrows. So he needs to "launder" the money - make it look legitimate.
The AML Act exists to stop this. It forces businesses to play detective: Where does the money come from? Is this normal? Does it smell fishy?
Who Must Follow the Law?
Not everyone. But if you're:
- Accountant or bookkeeper
- Lawyer
- Real estate agent
- Financial institution
- Insurance company
- Or deal with goods over 10,000 DKK in cash
...then you're covered. And yes, this applies even if you're a sole proprietorship.
The 5 Main Duties (What You MUST Do)
1. Know Your Customer (KYC)
What: Find out who you're doing business with How: Check ID, understand their business, find beneficial owners Why: You can't spot abnormal behavior if you don't know what's normal
2. Risk Assessment
What: Assess if customer is low, medium, or high risk How: Look at industry, geography, complexity Why: The corner hairdresser needs less monitoring than the import/export company
3. Ongoing Monitoring
What: Keep an eye on changes How: Regular reviews, check large transactions Why: The quiet bookstore suddenly moving millions? Red flag!
4. Record Keeping
What: Save everything for 5 years How: Digital strongly recommended Why: If authorities ask, you must prove you did your job
5. Reporting Duty
What: See something suspicious? Tell authorities How: Report to Money Laundering Secretariat Why: You're society's first line of defense
Risk Assessment in 2 Minutes
Low Risk ✅
- Local business
- Known owner
- Simple circumstances
- Normal industry
→ Basic KYC is enough
High Risk 🚨
- Cash-intensive industry
- Complex ownership
- International transactions
- Politically exposed persons
→ Turn up the control
The Biggest Misconceptions
"I know my customers" Personal knowledge ≠ documented KYC. Law requires paper trail.
"It only applies to banks" No! Accountants, lawyers, and many others are covered.
"Small amounts don't matter" Money laundering is about patterns, not just size.
"I'm not at risk" Fines start at 10,000 DKK and can reach millions. Plus you can lose authorization.
Practical Example: Accountant Scenario
You're an accountant. New client arrives:
Step 1: "Can I see your passport and company registration?" Step 2: "Who owns the company? All the way up to individuals?" Step 3: "What do you need help with?" Step 4: Assess: Normal manufacturing company = low risk Step 5: Write it down and save it
Done! That was basic KYC.
When Should Alarm Bells Ring?
- Large cash amounts without good explanation
- Complex money flows without business reason
- Customer won't disclose ownership
- Payments to/from high-risk countries
- Behavior not matching company size
Rule of thumb: If your gut feeling says "this is weird" - it probably is weird.
Sanctions - When the Law Has Teeth
Administrative fines:
- Minor violations: 10,000-100,000 DKK
- Serious violations: Up to 10% of annual turnover
Criminal sanctions:
- Up to 8 years prison for serious money laundering
- Loss of authorization/approval
Reputation:
- Your name in newspaper + "money laundering" = career suicide
Your Survival Guide
- Have written policy - even a simple one
- Use checklists - don't forget anything
- Document everything - if it's not written down, it didn't happen
- Be proportional - adapt effort to risk
- When in doubt, ask - better once too often
TL;DR (Too Long; Didn't Read)
The AML Act requires that you:
- Know who you do business with
- Assess if they're risky
- Watch for suspicious behavior
- Keep documentation for 5 years
- Report if something smells
It's about being society's watchdog. Yes, it's cumbersome. Yes, it takes time. But the alternative - criminals freely laundering their money - is worse.
So next time you complain about KYC procedures, remember: You're helping make Denmark a harder place to be criminal.
And that's actually pretty cool.
