Converting black money into white money through illicit means is a crime by law and regulatory authorities are developing counter-regulation to combat such suspicious activities. Due to strict law enforcement, the fraudsters can’t use their illegitimate funds to lead lavish lives due to the risk of getting traced or questioned. Moreover, it would be more challenging or impossible to open an account without investigation and providing banks with a source of income. Thus, to hide the black money without getting traced the criminal activists use multiple gateways to make their money legitimate, which is actually referred to as money laundering. So, the regulatory authorities have established a well set of anti-money laundering compliance to stop suspicious activities from the grounds.
What is an Anti Money Laundering Solution?
Anti-money laundering is an automated procedure of screening customers’ backgrounds and monitoring the clients’ ongoing activities in order to determine and deter the risk of money laundering. The customers’ are screened against sanction lists, global watchlists, and PEPs lists. AML Verification is considered as part of know your customer (KYC) verification and is set mandatory for all businesses which involve transactions such as online gaming platforms, gambling websites, banks, cryptocurrency exchanges, etc.
AML Compliance is the standard for companies and corporations to remove the money laundering and counter-terrorist financing activities by determining the sources. Mainly, in the start, anti-money laundering compliance was used for helping the financial firms to eliminate drug trafficking. The major reason for drug trafficking was to regulate the illegal money and due to its rapid increase, AML laws were established and implemented.
AML Systems, as well as counter financing of terrorism, have become global concerns as illegal money transferring is increasing exponentially. The international regulatory authorities such as the world bank and FATF with mutual interests with national regulators like FINCEN, etc are making new strategies to put off money laundering and to send criminal activists behind the bars.
Three Stages of Money Laundering
The fraudsters tend to convert the illicit money into legitimate money in three stages which include;
- Placement
This is the first step, through which the fraudsters tend to place their illegitimate funds into legitimate financial firms such as banks.
- Layering
Afterward, when the criminal successfully places the funds, the fraudsters layers the money into the legal money placed in the financial companies in order to eliminate the risk of getting traced. By doing this the financial institution’s attention is drawn from such activities.
- Integration
This is considered the last stage of money laundering. The money launderers used the cleaned money to invest in legal affairs such as investing in real estate, etc. as a legitimate tender.
Money laundering Through Multiple Industries
Shell Companies
Such companies which exist on the papers but don’t have any physical appearance are referred to as shell businesses. These ghost companies portray the image of legitimate and well reputable businesses to provide facilities that automatically pave the flow of transactions through it. The funds gained by such a transaction are quoted as profits and are labeled as legal money. Which are deposited into the finance firms and later on this cash is used in suspicious activities. Hence AML solutions are viable to detect such industries.
Cryptocurrency Exchanges
The emergence of digital currency has become the center of attraction nowadays. However, cryptocurrency is becoming infamous due to the presence of money laundering in the system, performing illicit transactions for their own personal gains. Crypto being unregulated and due to the factor of anonymity, the criminals are quite able to place their illicit money in the crypto wallets and exchanges. Crypto itself is untraceable, hence detecting money trails is also quite challenging. Therefore AML Monitoring is the best method to secure crypto space.
Art Industry
As the art industry is becoming more revenue-generating and more and more transaction tends to do, so it’s becoming the hub for the money launderers. Due to this security concerns are rising so regulatory authorities are looking into it to prevent such happening. The fraudsters buy the expensive paintings with their illegal money. By this, the criminal hides their money and gets unnoticeable. However, to protect the art industry AML screening is the most appropriate procedure to do so.
Final Takeaways
Wrapping it up, anti-money laundering is viable as well as a regulatory obligation to be adopted by the businesses in order to grow and increase their credibility. This secures the businesses’ interests and eliminates the risk of fraud. AML Security provides the business with the utmost prevention against criminal activities.