What is the "Look-Back Period" in AML compliance?

The "Look-Back Period" in AML (Anti-Money Laundering) compliance refers to the time frame during which transactions must be reviewed to identify suspicious activities. This period is critical for financial institutions as it helps them detect patterns that may indicate money laundering or other illicit financial activities. By examining transactions within this designated time frame, compliance officers can assess whether any activities fall outside the norm for a particular customer or account and consequently determine if further investigation or reporting is warranted.

Establishing a Look-Back Period is vital because it allows banks to maintain adequate records and ensures they can respond appropriately to regulatory inquiries about potential risks. It is part of the larger framework of ongoing customer due diligence and monitoring obligations under AML regulations.