Internal audit plays a crucial role in supporting organizations as they navigate the growing complexity of money laundering risks. While regulatory compliance is often the starting point, auditors are expected to apply a risk-based mindset that goes further, ensuring management has robust controls and continuous monitoring.

The first step for internal audit is understanding the business model and identifying where money laundering risks could manifest. This requires mapping out processes such as customer onboarding, payments, trade finance, and correspondent banking relationships. Auditors should assess whether risk assessments are performed regularly and whether they incorporate emerging typologies, including virtual assets, shell company structures, and geopolitical risk exposures.

Internal auditors must also examine how effectively the first line of defense manages risks. For example, are customer due diligence procedures consistently applied? Is there evidence that enhanced due diligence is performed when higher-risk clients are onboarded? Does transaction monitoring generate alerts that are both meaningful and manageable? These questions help auditors evaluate whether AML frameworks are functioning as intended.

Another key area is governance and culture. Strong AML compliance depends on clear accountability, senior management oversight, and adequate resourcing. Internal auditors should assess whether compliance functions have sufficient authority, whether reporting lines are effective, and whether issues raised in prior examinations are being resolved promptly.

Technology is another area requiring attention. Many firms are implementing advanced monitoring tools, machine learning algorithms, and automated screening systems. While these can enhance detection, they also introduce risks such as data integrity, model bias, and system dependency. Auditors should review implementation controls, validation processes, and contingency planning for system failures.

Finally, auditors should ensure that findings are reported in a way that enables action. Recommendations must be practical, prioritized, and linked to organizational objectives. Clear communication with the audit committee and regulators, where applicable, reinforces the organization’s commitment to AML compliance.

By applying a proactive, risk-based approach, internal auditors provide more than assurance — they act as catalysts for stronger defenses against financial crime.