Global organizations face a high risk of Money Laundering. Money launderers have adopted advanced techniques to dodge Anit-Money Laundering (AML) regulations. Global organizations mostly rely on third-party service providers and distributors. Moreover, they have to conduct business in different countries with varying rules and regulations. The varying rules and regulations of conducting business in every country make global organizations vulnerable to Money Laundering, making global companies exposed to a high potential AML risk. AML is not only useful in reducing money-laundering but also help in preventing illegal activities by identifying the source of money.
Even though international regulatory authorities such as IMF, FATF has formulated strict AML checks for financial transactions but the non-financial companies still do not comply with these regulations. It is because global non-financial organizations do not have a good understanding of how non-financial institutions could be used for money laundering. Most global organizations fail to perform due diligence to get their customer information. Although some companies are themselves involved in money laundering activities but most of them become victim of money laundering because they fail to imply with AML compliances. A recent story in the Reuters reveals how drug cartels use non-financial global organizations to launder their money. The story highlighted that many non-financial global corporations unknowingly become these money laundering activities by drug cartels and had to face heavy fines by the governments and international Anti-Money Laundering regulatory authorities.
Most Common Money Laundering Techniques
Numerous prevalent AML risks that global organizations face come with two primary sources, trade-based money laundering, and third-party payments. In trade-based money laundering, the criminals imply cross border transactions to hide the source of money while in the third-party payment scenario, the organization receives or transfers money to the source or entity which have not received the services or products directly from the company. The trade-based money laundering is becoming more common AML risk that global organizations face. The trade-based money laundering is used with other techniques to further conceal the source of money. Even though trade-based money laundering is becoming the most popular technique for international money laundering, global organizations have not taken effective steps for eliminating this type of money laundering.
Ways to reduce and diminish Money Laundering
In order to comply with the AML regulations, the companies should conduct proper AMLD5 due diligence. To follow AML compliance, Global organizations specifically the non-financial organizations need to keep check and balance and devise a basic AML program. The global organizations should collect relevant customer information and run them through the official and non-official high-risk watch lists to identify any potential risk customer. For doing business in high-risk countries such as China and Russia it is important for AML compliance, that companies should ensure that their distributors and resellers provide lists of their beneficial owners. Moreover, the Global organizations must keep the legal documentation of their business dealings with distributors and resellers, which verify that they are complying with global AMLD5 regulations. The companies could comply with AML regulations if they put proper checks.