With the rise of digital money laundering, the risk of a business getting caught up in such operations has never been higher.
According to the National Crime Agency’s National Strategic Assessment of Serious and Organised Crime, while public consciousness of the dangers of cyber-crime has vastly improved, the danger and impact of high-end money-laundering threats persists.
The report offers no confirmed figures about the scale of money laundering, but it is estimated that the amount of money laundered would be between £36 billion and £90 billion.
In addition to facilitating most types of criminal activity, money laundering causes untold damage to UK businesses.
It’s not just the financial price that affected businesses pay – often their reputation will be damaged beyond repair.
What are the new threats?
Money laundering has dominated the financial headlines in recent months with news that the UK aims to tighten defences against emerging techniques.
This includes the introduction of 4MLD (Fourth Money Laundering Directive), which was agreed by the European Community in 2015 and is scheduled to be implemented on 26 June
The directive will secure data handling and introduce radical measures to help UK banks identify money-laundering threats and prevent terrorist financing.
It will also provide comprehensive reports on owners of corporate entities in a wide range of countries, producing a register of ownership that will help firms understand who they are doing business with.
While traditional methods of money laundering still pose a threat, new money laundering risks have become more significant. Online banking, electronic cash, e-gold, pre-paid phone cards and proprietary systems used in the transfer of rights owned and patented are now providing new routes and possibilities for launderers.
The alternative payment systems utilised in these new money-laundering practices are of particular concern. Virtual or digital currencies, such as Bitcoin and Ethereum, have been increasingly used for laundering.
An attractive option for criminals, Bitcoin can now be used for internet shopping while the owner remains untraceable. The age of digital currencies means that digital money-laundering practices are presenting major risks to companies, and as technology advances so do criminals and their techniques.
What can you do to protect your business?
- Educate your employees
Implement processes to educate employees on the red flags associated with money laundering. An unwillingness to provide information, providing information that is deemed incomplete or inconsistent, the presence of unusual money transfers, and the use of complex group structures are all warning signs of money laundering.
Senior employees can also be appointed to examine funding sources for particular deals or investments.
- Improve your due diligence
Carry out customer due diligence to establish the identity of the client, partner or any other party involved.
The same practices should be used to identify the real beneficiaries of the transaction.
- Introduce internal controls
Introduce internal controls and complete a policy statement for your company. There are various accounting and cash handling processes your business can introduce to make it difficult to launder money, even with the new digital threats emerging.
No-cash policies are also useful when handling transactions of a particular size.
- Handle transactions with high-risk countries with care
Enhanced due diligence should be carried out in situations where a country or financial corridor is deemed high risk.
Knowing the risks of money laundering, particularly in regard to the latest digital techniques, is a vital defence when protecting your business from such threats.