When testing the effectiveness of AML policies, what factors should auditors consider?

When assessing the effectiveness of Anti-Money Laundering (AML) policies, it is critical for auditors to consider regulations and international best practices that are specific to the industry. This is because AML regulations are continually evolving and vary from region to region and across different sectors. By aligning the audit with established regulations—such as those set forth by bodies like the Financial Action Task Force (FATF) or industry-specific guidelines—auditors can ensure that the policies not only meet legal requirements but are also in line with global standards aimed at preventing money laundering and terrorist financing.

Understanding and integrating international best practices helps auditors evaluate whether the company's policies are robust, effective, and comprehensive enough to mitigate potential risks. Moreover, these regulations and practices serve as benchmarks for assessing compliance and effectiveness, allowing auditors to identify gaps and areas for improvement.

Focusing solely on internal policies without considering these external frameworks could lead to an inadequate assessment, as the organization may unknowingly overlook critical compliance requirements or practices recognized as effective in neighboring jurisdictions or the industry as a whole.