Money Laundering Proof Your Company: AML Check

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  • 8/20/2019 Money Laundering Proof Your Company: AML Check


    Money Laundering Proof YourCompany: AML Check

    by David Drake

     “The World Bank and the International Monetary Fund (IMF) estimate that global moneylaundering constitutes about to 3 to !ercent o" the #orld$s gross domestic !roduct% In nominalterms that$s a staggering &'% and &3%* trillion dollars in a year%+ 

    Money laundering  is the act o" attem!ting to conceal !roceeds "rom illegal activity therebymaking them a!!ear legitimate% These “dirty monies+ are o"ten associated #ith !roceeds coming"rom drug tra""icking, ho#ever any monetary activity can be associated #ith money laundering% Ina largely global environment money laundered can come "rom and su!!ort "inancial "raud, cybercrimes, human tra""icking, black market arm sales, corru!tion and terrorist "inancing%

    -side "rom directly aiding criminal activity, money laundering has devastating e""ects to the overalldevelo!ment o" economies es!ecially those in develo!ing nations and the "inancial institution%

    In the case o" the "inancial sector, ram!ant money laundering stum!s gro#th and creates

    ine""iciencies so much so it im!acts the overall gro#th o" the economy% -ccording to a re!ortreleased by the -sian Develo!ment Bank (-DB), money laundering “erodes "inancial institutions+ as it imbibes a culture o" "raud and corru!tion #ithin its #alls% When "raud is e.!osed, this erodestrust among customers and the institution% This is es!ecially destructive in develo!ing countries

  • 8/20/2019 Money Laundering Proof Your Company: AML Check


    #here !erce!tion o" risk is higher and any indication o" ram!ant money laundering hurts theinvestment climate%

    -side "rom its negative im!act on the "inancial sector, money laundering has a more directnegative gro#th im!act on the economy% It diverts resources to less !roductive activities and

    enables domestic corru!tion and criminal activity thereby de!ressing the local economy%

    The adverse e""ects o" money laundering are not lost on #orld leaders% There have been consciouse""orts among governments to !ut into !lace the !ro!er sa"eguards to curtail, and one day !erha!scom!letely eliminate, money laundering activities%

    In the /nited 0tates alone, there have been la#s and "rame#orks in !lace that must be observedby "inancial institutions and various businesses to ensure that they are !ro!erly sa"eguardedagainst money laundering%

    My !artner () in  1onsultD-%com, 0cott -ndersen, s!ent '2 years as a !rosecutor #ith theFinancial Industry egulatory -uthority (FI4-), 4506 egulation, Inc and 4e# 5ork 0tate-ttorney 7eneral% 8e says, “FINRA announced its examination priorities for 2015, which once

    again places a hea! emphasis on anti"mone! laundering #A$%& sureillance s!stems and 

     processes to identif! suspicious transactions'(  8e added, “)ro*er"dealers are re+uired to estalishand maintain a written -ustomer Identification .rogram #-I.& to erif! the identit! of eachcustomer opening a new account'( 

    Safeguarding Against Money Laundering

    The Bank 0ecrecy -ct (B0-) o" 92 !rovides the base "rame#ork "or anti  : money laundering(-M;) initiatives% The B0- !rovides the rether la#s soon "ollo#ed that "urther enhanced the ca!abilities o" la# en"orcement agenciesto im!lement -M; initiatives%

    In the #ake o" 9?, the @atriot -ct #as enacted that "urther strengthened -M; measures byenhancing due diligence measures in "inancial institutions% It gave the /0 government "urtherreach in scrutiniAing bank records should there be sus!ected threats to national security%

    0o ho# do these regulations im!act common businesses For starters, even i" the !rimary targeto" -M; measures are "inancial institutions, money laundering means that there must be ana!!arent “legitimate source+ "rom #hich the money is derived% @rior to the @atriot -ct, moneylaundered #as channeled "rom shel" com!anies to banks, but because the -ct no# !rohibits banks"rom doing so, launderers need other channels% 4o#, they are conducting money launderingactivities through legitimate businesses%

    Fund-merica, a leading cro#d"unding "inancial tech !rovider, !rovides an illustration on suchmechanism in their blog !ost “-M; 1hecks : What Why+ % I" a business unkno#ingly takes on akno#n terrorist or "inancial criminal as an investor, and this is "lagged by the FBI or any other

    regulatory body, this might lead them to think that the business is aiding these criminals in moneylaundering%

    What "ollo#s suit #ould be a host o" negative !ublicity and massive e.!enses "or litigation andtime lost dis!roving such claims%

    0cott -ndersen, #ho is also the 7eneral 1ounsel "or Fund-merica says, “/he failure to estalish

     proper A$% procedures and s!stems can lead to regulator! action against !our compan!, and diminish !our compan!s good name and reputation'(  Businesses, es!ecially startu!s and 0M6$s,may be hesitant to !ut in !lace !ro!er -M; structures "or they are e.!ensive to set u! initially%

  • 8/20/2019 Money Laundering Proof Your Company: AML Check


    FundAmerica, ho#ever, has develo!ed the necessary so"t#are to do -M; checks% This so"t#areties into the ; databases to run -M; re!orts all "or the ine.!ensive !rice o" &'% There are

    other -M; so"t#are out there that !rovide the same checks, such as Beta 0ystems 0o"t#are and0a"e Banking 0ystems, but Fund-merica$s -M; check is more cost e""ective%

    It !ays "or businesses to !ro!erly sa"eguard themselves "rom the !otential threats o" money

    laundering #ithout burning a hole in their !ockets% -s they say, !revention is better than cure, andFund-merica !rovides a cost e""icient -M; service%

    FootnoteC()I4 F/;; DI01;>0/6, 0cott -ndersen and I recently "ormed and are !artners in a 061/ITI601>[email protected];I-416 1>40/;T-415 "or B>6ED6-;60, I460TM64T -DI060 and other "inancialinstitutionsC 1>40/;TD-%1>M%

    4oteC This article originally a!!eared on 8edge1o%4et #ith this link htt!C??thesoholo"t%com?moneyElaunderingE!roo"EyourEcom!anyEamlEcheckEbyEdavidEdrake? on February =, '2%

    @hoto credit to #all!a!erGme%com

    David Drake  is an earl!"stage e+uit! expert and the founder and chairman of New or*"ased ictoria 7lobal with diisions ;DH 1a!ital , a famil! office and priate e+uit! adisor! firm, and  The0oho ;o"t Media 7rou! /he 3oice of -apital Formation  a gloal financial media compan! 

    inoled in -orporate -ommunications, .ulications, and -onferences' ou can reach him directl! at 4aid%46-apital'com'