Numerous businesses these days need to watch out for potential money laundering activities. If suspicious activity is detected, reporting is necessary. The problem with money laundry compliance and related topics, like proof of address or AML, is that it is not properly understood by most business owners around the world. There are countless misconceptions that need to be shattered since the importance of money laundering laws cannot be ignored.
Never believe the following misconceptions because they will only hurt your business.
Money Laundering Always Involves Money
Whenever hearing the term “money laundering” people believe that a business moves money around in order to hide where it comes from. This is true for many situations but money laundering does not always involve money. For instance, money laundering laws also involve safeguards against companies that set up really complex structures in order to avoid having to pay taxes. Even something like recommending jurisdictions to hide company details from the investigators is seen as a part of money laundering. Accountants and other professionals that offer such advice are charged with being involved in money laundering even if they have no real physical connection with the money.
Suspicious Activity Reports Happen When Money Laundering Is Successful
This misconception practically states that only when money laundering happens a report is filed. In reality, companies are required by law to identify countless different suspicious activities. The goal is actually to prevent money laundering from happening in the first place, not to deal with it once it already happened.
A financial company that handles financial transactions for clients need to have some sort of system in place to identify any type of suspicious activity. This can be something as simple as making a much larger payment than usual. After the suspicious activity is identified, new procedures are activated to guarantee that nothing bad happens.
It Is Known When Someone Launders Money
People that work in accountancy for a very long time can easily end up thinking that it is easy for them to identify suspicious transactions or dodgy clients. Complacency like this is exactly what people want to take advantage of. It is practically impossible to know that someone will be a completely honest client, even if that client never did something bad in the past.
Remember the fact that the professional money launderers actually spend years to perfect the methods they use. It is practically impossible to spot them just by looking at them. In fact, it is even difficult to identify suspicious transactions when they are handled by someone that has a long experience with money laundering actions.
AML Is Just A Waste Of Money And Time
AML (anti-money laundering) compliance does require a lot of effort and numerous resources. Unfortunately, there are countless business owners that see these as just a waste of money and time. This is completely incorrect. If you do not use AML procedures, you do not really know what the client is and how the money is used or where it came from. Simply wanting to have clients that pay fees and not caring about helping finance terrorism or breaking the law is something that often happens.
AML policies do pay off. There are countless examples of huge money laundering networks that were discovered simply because of the procedures that are in place with banks and other financial institutions. In the UK alone, there are around 1,400 money laundering cases that end up with convictions every single year.
On the whole, money laundering is a huge business. It takes a lot of money and time to counter it. AML tactics do work though and they keep getting better and better.