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Emmanuel Agwu
Money laundering is a global problem today that is difficult to eliminate due to criminals constantly inventing new techniques to commit the crime. Due to its ever-evolving and detrimental nature, businesses operating in regulated industries are mandated to adopt anti-money laundering practices with the right technology in place to stay compliant with regulations. There are several examples of money laundering today that would thrive without these technology and processes.
Financial institutions need to be conversant with these examples of money laundering schemes and how to combat them to stay compliant in their operations.
Money laundering refers to the process of “cleaning” money with illicit origin (e.g. drug pushing, human trafficking) to make it appear legitimate. The process involves running the money through three stages - placement, layering and integration, after which the criminal can freely spend the money.
Criminals can't just spend the cash obtained from illegal operations without attracting the attention of the authorities. Regulatory authorities are always interested in the source of wealth, especially from individuals whose financial history does not align with their current financial strength.
Intelligent criminals take advantage of the legal financial system by running illegal funds through high-cash businesses to make the funds appear like proceeds of the business. This way, the business becomes a legal backing or source of funds if investigated, eliminating suspicions of illegal activities.
Let's look at a few examples of money laundering in different industries and how businesses can prevent them:
Case Example: HSBC
In 2012, HSBC was fined $1.9 billion for facilitating money laundering by allowing drug cartels to launder millions of dollars through its U.S. operations. The bank failed to implement robust AML measures, such as proper customer due diligence and monitoring of suspicious transactions.
Prevention Strategies:
Case Example: Vancouver Real Estate Market
In Canada, the Vancouver real estate market was used extensively for money laundering. Criminals purchased luxury properties using illicit funds, inflating property prices and making it difficult for legitimate buyers.
Prevention Strategies:
Case Example: Crown Resorts
In 2020, Australia's Crown Resorts was investigated for facilitating money laundering through its casinos. The company allowed high rollers to deposit large sums of cash without adequate scrutiny.
Prevention Strategies:
Case Example: The Bouvier Affair
In the Bouvier Affair, art dealer Yves Bouvier was accused of money laundering and fraud by inflating the prices of artworks and facilitating the movement of illicit funds through art transactions.
Prevention Strategies:
Case Example: Bitfinex Hack
In 2016, the cryptocurrency exchange Bitfinex was hacked, and approximately $72 million worth of Bitcoin was stolen. The stolen funds were laundered through multiple cryptocurrency wallets to obscure their origin.
Prevention Strategies:
Case Example: Gold Smuggling in India
In India, gold smuggling has been a prevalent method for laundering money. Criminals purchase gold with illicit funds and smuggle it into the country, converting it into legitimate assets.
Prevention Strategies:
Case Example: Trade-Based Money Laundering (TBML)
In TBML schemes, criminals use trade transactions to launder money by over-invoicing or under-invoicing goods. For example, a retailer might import goods at inflated prices to move illicit funds.
Prevention Strategies:
Some of the signs that may be indicative of money laundering activities include:
Read more on money laundering red flags for businesses today.
Establishing robust KYC and AML check procedures is key to preventing money laundering. Smile ID compliance solutions empower businesses to achieve all of these in one place. Prevent money laundering through the following:
Smile ID offers an array of identity verification solutions to help businesses meet their KYC compliance needs. This includes:
Take extra precautions by running an AML check on the customer against:
Businesses can run verifications via our no-code platform or API/ SDK integration. Book a free demo today to learn more.
We are equipped to help you level up your KYC/AML compliance stack. Our team is ready to understand your needs, answer questions, and set up your account.