Asset Management and AML Risks

Blog / Asset Management and AML Risks

Just as in any other transaction, asset management is a field in which AML compliance must be taken seriously in order to prevent certain types of fraud and money laundering. Because asset management is one of the most profitable fields of the trade industry, it is much more important to secure the profit circulating in it. 

Asset management is one of the rare fields which benefitted from the pandemic. It had an 11% asset growth in 2020. Cornerstones of the field, retail portfolios and institutional investments had a growth of 41% and 59%, respectively. With this, the global asset management market has reached 250.12 billion in 2021, and by 2028, this number is expected to grow to $1113.53 billion.

Being one of the fields with the most growth and potentially increases the risk asset management faces. Frauds are occasionally being tried, both in and out of the field. Recently, two asset managers have been charged for an alleged 1.2$ billion money laundering scheme.

AML software is trying continuously to take down these attempts with the use of new features they are adding to their programs. However, before we look at AML software's importance in the field, it is better for us to understand it.

What is Asset Management?

Asset management is the process of gradually building up overall wealth through the acquisition, maintenance, and trading of investments with growth potential. Asset management professionals provide this service to their clients. They may also be called financial advisors or portfolio managers.

The dual objectives of asset management are to increase value and reduce risk. Most of us fall somewhere in the middle, and asset managers work hard to pinpoint that position for each client. In other words, the client's risk tolerance is the first thing to be considered. In order to meet the client's financial objectives while remaining within the client's risk tolerance, the asset manager's job is to decide which investments to make or stay clear of. Among the more well-known options, the assets may include real estate, stocks, commodities, bonds, alternative investments, and mutual funds.

The asset manager's role is to analyze thoroughly by utilizing macro and microanalytical methods.

While talking about the benefits of asset management, we can point out two major points: 

1. Decreasing Asset Breakdown:

When an unforeseen breakdown occurs, it not only costs money but also creates hurdles in the company's productivity. The workers are rendered idle, and the whole downstream process gets affected.

Not maintaining assets can regularly cause breakdowns, expensive repairs, etc. Asset management software emphasizes scheduling maintenance because when it comes to problems, prevention is better than repairing.

2. Maximizing Asset Life:

The real importance of maintenance is realized when a machine or vehicle is deployed on a heavy workload. For asset maintenance, the software will automatically send alerts and notify the personnel. Consequently, physical asset management is done efficiently.

Asset management organizations are subject to regulatory procedures; embodying customer onboarding strategy is essential.

The Importance of Asset Management

  • Accounts for All of an Organization's Assets: The process makes it simple for businesses to maintain track of all their assets, whether liquid or fixed. Firm owners will be aware of the location and use of their assets and whether changes have been made to them. Consequently, the recovery of assets can be made more efficiently, hence, leading to higher returns.
  • Assists in Ensuring Accurate Amortization Rates: Since assets are regularly inspected, asset management ensures that the financial statements accurately reflect them.
  • Assists in Risk Identification and Management: Risks associated with using and owning specific assets are identified and managed as parts of asset management. It implies that a company will always be equipped to handle any risks that may arise.
  • Eliminates Ghost Assets from the Company's Inventory: Sometimes, assets that have been lost, damaged, or stolen may be incorrectly documented as having occurred. The company owners will be aware of the lost assets thanks to a strategic asset management plan, and they will remove them from the books.

 Types of Asset Management

  • Digital Asset Management (DAM): This fast-developing field focuses on managing digital assets. It entails the processing, storage, and effective management of digital material and content. This process is continuous and uses metadata. Software company Brandfolder notes: "It's important to think of digital asset management not only as a platform but as a process… a DAM system is like an enhanced digital media library that streamlines everything." 
  • Software Asset Management (SAM): Software Asset Management is a corporate method for reclaiming the budget and maximizing savings through active management and automation of software license acquisition, usage, and deployment.
  •  IT Asset Management (ITAM): IT asset management contributes to security, time, and cost savings and develops a solid technological foundation for the future. Information storage, organization, revival, and sharing are all parts of the process.
  • Fixed Asset Management: Even supply chain-focused businesses must take fixed asset management into account. An organization's revenue-producing assets are known as fixed assets and typically stay in their installed locations. PP&E, or "property, plant, and equipment," is another name for them.
  • Enterprise Asset Management: Enterprise asset management is an area that is rapidly expanding. Any physical asset or infrastructure a corporation has is organized, integrated, and optimized throughout its existence.
  • Financial Asset Management: This term relates to a more conventional view of asset management. It includes investments, property holdings, brokerage services, and intangible assets of a business.
  • Infrastructure Asset Management: Infrastructure is essential for cities and any other settlement. Roads, water access, electricity, and civil engineering are all included in this category.

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