Industries that Need Strict Anti-Money Laundering Measures
Money Laundering is a serious criminal offence and law enforcement authorities are working towards fighting these crimes. Criminals cannot lavishly spend their illegally gain funds without raising a question about the source of their income. Even it would be impossible for them to open up a bank account without opening a doorway of an investigation into their personal affairs. So in order to hide the trail that leads to the criminal deed, they use various methods to make their income seem legit. The anti-money laundering measures are there to capture the illicit funds and catch the criminals. With this blog, let’s dive into how money laundering is being done and how anti-money Laundering regulations fight these crimes.
The Stages of Money Laundering
There are different steps through which criminals are able to cleanse their illicitly obtained funds. Let’s dig deep into them.
This is the initial step that allows the criminal to place their illicit funds in the legal financial system by investing in different and unscrutinized opportunities.
This is the second stage of money laundering. In this stage, the criminal makes the source of money untraceable by layering it into the legal financial system so the attention is not brought to it.
This is the final stage in which criminal finally integrates the money into the legal financial system and make seem like it was obtained by a legit source.
How Criminals Launder Money Through Different Industries
Now that we have looked into the stages of money laundering, let us understand them a bit more deeply with examples as to how the practical process is performed in various industries.
These are the companies that do not exist in reality. They are registered only on papers and in reality, they are a ghost. They pretend to provide services and opens a way for cash flow through it. The money labelled as profits are then considered legit and deposited into the bank.
Crypto-industry is the fastest growing industry due to global digitization. However, it is also increasingly becoming infamous for the illicit financial flow. The anonymity factor in the industry allows criminals to place their illicit funds in the system. Then they proceed to layer it by exchanging it between crypto exchanges. Once the trail of the money becomes untraceable, the criminals can now integrate the money into the legal financial system as legit money.
This art market has become the latest concern for the regulatory authorities as it is becoming increasingly a hub of money laundering. The norms of the industry prefer anonymity. The criminal buys the expensive piece of art with their illicit funds. Since the industry is unregulated, the source of the money is not questioned. Then the criminal hides the art in the freeport to layer the funds. After a period of time, the art is either sold with high value or used as collateral in the bank for the loans. The loan is granted on the basis of art and the bank does investigate the source of the money from which the art piece was bought. The money gained is then invested and the profits gained are considered legit funds.
KYC AML Compliance and Digital Solution
The global regulatory authorities are concerned by these activities and regulating the industries. The regulated industries are required to take strong due diligence and risk management measures so that they are able to identify the criminals and trace them back to their illicit funds.
The regulatory authorities have provided the industry with the regulatory framework that guides the industry on how to catch criminals. They are to verify the identity of any business or client they are dealing with and then screen them against the provided global watchlists to ensure that they have not been involved in any illicit crimes. They are also to keep strict on them and monitor their financial actions to ensure that no suspicious activity is being done. If they see any unusual activity, they must report it to the authorities.
The software-based anti-money laundering is AI-trained and more accurate than the manual process. The digital solution of anti-money laundering helps the companies to comply with these measures seamlessly.