Last Updated on Mar 5, 2020 by James W
What is money laundering? It’s taking illegal money and making it look legal – that’s laundering in a nutshell. This is done by concealing the ownership or investing in property to hide the funds. It may also be used to dodge taxes. Classic money laundering is turning criminal or ‘dirty’ money into ‘clean’ money. It could also mean trafficking stolen goods.
Be aware that sometimes, criminals have complicit official members in businesses, that are willing to take financial rewards for turning a blind eye. Could this potentially occur in your company? Is someone already dealing in dirty cash?
It’s up to you to strictly police transactions.
Although criminals grow and adjust to changing markets, some warning signs stay the same. Recognizing money laundering, when it pops its head above the parapet, is a challenge, but you only need to experience suspicion to consider reporting the client or transaction. Here are some of the classic warning signs that you should look out for:
Geography
You should ask new clients all sorts of questions and offer them opportunities to clear up any suspicious situations. For example, why would someone, based far away, be contacting your firm about a retainer that has no geographic association with the business?
Foreign nationals living overseas are unlikely to choose your firm, when your company has no connection or affiliation with that country, so where has this all come from?
Unlikely Sources of Funds
Large amounts of cash and private funding should be regarded with some level of suspicion. How has the client ended up with this amount of money?
Does it sit well with all the information you have on this individual? It may be wise to ask for documentary evidence that the money is legitimate. Third party funding can be innocent, but it can also be evidence of layering to obfuscate the source of their funds.
Sudden Direction Changes
Sure, it’s only natural that financial plans change and some clients will modify their instructions. Where there is no clear, logical explanation for why this is occurring, ask more probing questions. Sometimes, they will have just used your business to get their money into your client account. Other times they may be attempting to hide a fraudulent cheque.
With almost £15 billion laundered through the UK alone every year, it’s important that businesses keep their eyes out for the warning signs of money laundering. Of course, you won’t be able to detect criminal behavior every time, but you must do your best to protect yourself from the law enforcement.
Develop a scale of risk for all your clients. Many launderers will want to stay as anonymous as possible and won’t want to chance any face time. Regularly review each client and detail the risks you believe they pose. Make sure your employees are trained to recognise the warning signs of money laundering and how to flag up a concern.
