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AML Legislation: Recognising and Preventing Money Laundering

With the sixth anti-money laundering directive, called AMLD6, the European Union wants to enforce even stricter measures to combat financial crime. Avoid involvement in money laundering so that you are spared the negative consequences.

Today, money laundering is a well-known and common phenomenon that takes place in many shapes and sizes around the world. It is not uncommon for money laundering scandals to reach the news, often involving influential organisations or individuals. Think of examples such as the Panama Papers or the Russian Laundromat.

Refined Money Laundering

The most common method of handling criminal money is through another company that handles a lot of cash payments. Many criminal organisations therefore own several 'cover companies', which vary from restaurants and souvenir shops to casinos and massage parlours. Legitimate profits from these companies mix with criminal money, hiding the origin.

An example close to home is the money laundering affair of the Dutch ING bank. It was recently revealed that ING is involved in a money laundering scandal in the Polish branch of the bank. ING's branch in Poland turned out to have very poor anti-money laundering controls. The causes were disconcerting: internal systems were seriously out-dated, customers were hardly or not screened at all and suspicious transactions were insufficiently investigated. Criminal customers could therefore transfer dirty money undisturbed through ING accounts.

Increasingly strict and complex enforcement

Around 2 trillion dollars are laundered worldwide every year. In Europe alone, it is about 100 billion euros. The European Union has therefore applied the European Anti Money Laundering (AML) legislation since 1991. These are money laundering directives that all EU member states must translate into national legislation. The recently published sixth anti-money laundering directive includes a list of 22 money laundering connected offenses that EU member states must criminalise. Examples include human trafficking, cybercrime and illegal arms trade. AMLD6 also aims to improve international cooperation and enforcement by introducing investigative instruments and rules. Finally, the penalties for private individuals have been increased and new penalties have been drawn up for legal entities.

Facilitating complicit money laundering

Yet many organisations appear to be unaware of changes in anti-money laundering legislation and that is problematic. On the one hand, because if it turns out that your organisation is doing business with parties that are guilty of money laundering, you will not only incur reputational damage but also be subject to significant fines and court settlements. On the other hand, because AMLD6 also allows legal persons to be prosecuted. That can cause organisations to be temporarily banned from doing business or even forced to close permanently. Moreover, under the new anti-money laundering guidelines, not only persons who are directly guilty of money laundering are punishable, but also persons who provide the means or deliberately facilitate this.

So when your organisation is paid by an unknown third party that is not in your customer base, it is important to verify. It could be that you are otherwise accused of deliberately looking the other way.

Stay vigilant

It is therefore very important that you are alert to money laundering. Large cash amounts, unrealistic prices or low customer growth are obvious indicators.

Can money laundering scandals be prevented altogether? That's hard to say. But one thing is certain: your business’ risks are significantly reduced when you choose to have your customers carefully screened. Understanding the stakeholders, the organisation's business history, fraud risks, and other factors that can affect your customer relationship will help you make informed decisions about establishing and managing customer relationships. Graydon provides solutions to support you in this. Wondering which Graydon solution is best for your situation? And would you like to discuss this with one of our consultants? Leave your details and we will get back to you as soon as possible.

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