Whatever the business, if you are covered by the money laundering regulations (by being part of a firm within the regulated sector), then you need to meet certain requirements to help prevent money laundering activities.
It is the responsibility of organisations within the regulated sector to comply with the regulations; and with penalties that consist of fines and reputational damage, it is in their best interest to follow the rules. A top-down method should be put in place to implement a clear attitude around the problems in money laundering, and by the push starting with the managers and executives, the employees will then follow suit to produce a complaint workforce.
The Importance of Anti-Money Laundering
Anti-money laundering (AML) refers to the procedures, laws, and regulations designed to stop the laundering of ‘dirty’ money into the economy. AML laws are far-reaching and respected when it comes to the power they have over business. For example, AML regulations require institutions to complete due-diligence checks on their customers to make sure they aren’t aiding money laundering activities.
Global recognition of the rules and regulations arose when the Financial Action Task Force (FATF) was formed in 1989. This group set international standards for fighting money laundering, and therefore helped to promote a legitimate and clean stable financial market.
The UK’s AML regime has stepped up recently, as 2018 saw the launch of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). This group improve general standards by working with advisors and law enforcements to prompt for improved cooperation.
Customer Due Diligence
Due diligence means that you take steps to identify your customers by checking they are who they say they are to increase vigilance and security. This is so you can be sure of who you are doing business with, reducing the chances of problems occurring in the future.
If you fail to check out the background of your customers, you could be used to carry out money laundering, something that means you become tainted if the ‘dirty’ money moves through your business, whether you realise it or not.
Due diligence is an integral part of the buying process for both sellers and buyers because it checks out the assets, liabilities, cash flow, and general financial management of the customer in question. This will either give you peace of mind before getting involved with them, or it keeps you out of the way of the wrong people that are wanting to exploit your business.
Although it can be seen as time wasting, it is a vital step to take in the buying and selling process to stop you from going into business with a group that could cause harm in the future – better to be safe than sorry!
Internal controls and monitoring
A business must make sure that it has adequate internal controls and monitoring systems to avoid becoming the next victim of money launderers. These controls should alert anyone relevant within the business if criminals are attempting to use the company for laundering. Once the right people have been informed, they can take the right steps to prevent the threat from becoming anything more.
Your controls should include:
- Having a ‘nominated officer’ creates a figure within the business that employees can report to
- If you have a larger and more complex business, have a compliance officer can help maintain an understanding across the workforce around the rules they should be following
- Making sure the senior managers know are aware of their responsibilities and importance in the process of AML, providing them with regular information on the risks in money laundering
- Providing relevant training to employees to create a climate of shared understanding and compliance that take the risks into account in the every-day running of the business
- Recording and regularly updating you AML policies, controls and procedures by completing a policy statement (and sticking to it!)