Money Laundering Controls

Most people – even those who don’t work in the regulated sector – could have a pretty decent stab at defining Money Laundering. After all there have been numerous television programmes and films – fact and fiction – which have covered the subject.

And many of those people could also explain the Money Laundering process of placement, layering and integration whereby the funds are presented to a financial institution, then diced and sliced through various accounts to confuse whoever might be looking, and finally hoping we will believe that they have been obtained legally.

Unfortunately, in today’s world this slightly old-fashioned view of Money Laundering just doesn’t work – and for two reasons.

The first needs a major shift in terminology to rectify. The truth is that Money Laundering doesn’t have to be “Money”. Anything that has a value can be laundered. That includes residential property, business premises, cars, jewellery, works of art, and good luck with trying to change the title to “Value Laundering”.

The second reason is linked: the regulated sector is mostly about money. What we don’t always know is what was sold to create the money we handle and what might subsequently be bought with it. Consequently, placement doesn’t have to happen and every single transaction we process could be placement, layering or integration – or a combination of all three… And to broach the subject with a customer – no matter how delicately put – runs the risk of being interpreted as “Tipping Off”

So, to stop the financial criminals from benefitting from these outdated definitions we need to come at the problem from another direction: we need to understand what level of risk financial institutions are being asked to carry.

Risk is created by a number of factors. It could be who our personal customers are; where they live, what work they do. Or perhaps who our business customers are; who owns them, what they buy, what they sell, what they make, their import or exports markets, even, in some cases, who their own customers are.

We also need to look at geography (or, maybe more accurately, geopolitics): where do we do business, where do our customers do business? There are several reputable organisations – such as Transparency International and the Basel Institute on Governance (there are many others) – who can give us useful information on the likely risk of doing business in certain countries (sometimes country risk exists where you might least expect to find it!). And financial criminals have described import / export as “a beautiful market” (and that’s probably worth an article on its own…!)   

Beyond that, there are our products: it’s easy to see that products we sell which do not need face-to-face interactions are inherently riskier than those which do. And how do we sell those products: if it’s an on-line product the risk factor increases because of the possible anonymity.

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Source: Article “Money laundering control” was written by The ZISHI experts, and published in the Advice Matters Magazine | December 2024 |

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