25/11/2022
Money laundering concept and prevention :
What is Money laundering and terrorist financing?
Making a large amount of money which has been obtained from illegal sources of income and hidden from government financial regulators, law enforcement agencies.
That money is investment in terrorist activities, which is called terrorist financing.
The process of money laundering:
1. Placement: This is the first step of money laundering, dirty or illegal money which has been acquired from illegal sources and also placement into the financial system.
2. Layering: This is the second step of money laundering, separating and disconnecting from the illegal source of money, then transferring money via small financial transactions through a different complex way, like inbound or outbound transactions for the purposes of legal acknowledgment.
3. Integration: In the final step of money laundering, the now-laundered money is withdrawn from the legitimate account to be used for whatever purposes the criminals have in mind for it.
Country's economic impact of money laundering:
✅Unstable money market with demand and supply.
✅Black money will negatively affect government monetary policy.
✅Payment imbalance in foreign trade, export, and import businesses.
✅Increases in inflation, interest rates, poverty and unemployment rates.
✅Loss government revenue.
✅Increase of corruption and discrimination in the country.
✅Reduce foreign trade and investment.
✅Obstacle of the country's economic development.
Common ways of Money laundering:
✅Through invoice fraud by over-invoicing or under-invoicing, falsely described goods and services.
✅Online betting, gambling or gaming.
✅False KYC submission for bank account opening.
✅Using mules (A money mule is someone who transfers or moves illegally acquired money on behalf of someone else)
✅Opening shell corporations (a corporation without active business operations or significant assets).
✅Buying and selling commodities, investing in various assets like real estate.
✅Online banking or electronic fund transfer.
✅Transactions through cryptocurrencies.
✅Investing in commodities such as gems and gold that can be moved easily to other jurisdictions.
✅Drug trading.
✅Terrorist funding.
✅Bribery or gift money.
✅Earned money from different corruption.
✅Theft money.
✅Offshore accounts (opening a bank account outside of your home country)
✅By the use of Digital wallet or web base transaction.
Red flag indicators for money laundering prevention:
🖋️Should accomplish perfect KYC (Know your customer) and CDD (customer due diligence) procedures in place when customer onboarding.
🖋️Unusual transaction, which doesn’t do math with KYC or customer profile, status.
🖋️STR should be raised on time for suspicious funds as a part of the reporting entity.
🖋️Unusual source of funds, which funds are unable to identify.
🖋️Unauthorized transaction through international credit card.
🖋️Abnormal transaction features, like total numbers of transactions, transaction volume, per transaction ticket size as a part of transaction monitoring.
🖋️Geographic concerns, boarder or smuggling area customer transaction, a firm or customer who is not a local resident.
🖋️Politically exposed persons (PEP).
🖋️Jurisdiction risk is that some countries or jurisdictions have high levels of corruption, unstable governments or are subject to economic sanctions.
🖋️Sanctions risk listed country.
🖋️Forex trading transaction.
🖋️E-commerce, online or electronics based abnormal transaction.
🖋️Follow rules and regulation.
🖋️Risk factor analysis for update precaution.
🖋️Adverse media news, if the customer is a subject of negative news media in any part of the world.
Mahabubul Alam
Banker & Content writer.
