Posted by Marlon Thompson
‘That Could Never Happen To Me!’: AML Mistakes Businesses Make
It's not that simple!
The main character of Netflix’s hit show, Ozark, is a quick-talking financial advisor named Marty Byrde. Though Marty appears to be a trustworthy family man, he runs a major money-laundering operation in Ozark, Missouri. The series chronicles him swindling unwitting business people into using their storefronts to launder huge sums of drug money. Now, when watching the show, business owners might think to themselves, “That could never happen to me! Marty Byrde’s money laundering schemes seem so obvious”. However, the sad truth is that any of a business’ customers or clients could be a money launderer in disguise aka a ‘Marty Byrde’ and if you’re not vigilant, you’re putting yourself and your business at risk.
At Symptai Consulting Ltd. we warn businesses against becoming complacent or just plain ignorant of the very real risks money launderers pose, especially to small and cash-intensive businesses.
Some the most common mistakes you could be making that could lead to your business becoming the victim of money laundering ploys:
You don’t ask thorough and specific questionsWhenever you are approached with a business proposition, test its ‘money laundering potential’ by employing a three-step approach to ensure it's a legitimate partnership. Step 1- ask about the amount of money and other investors involved; obscure answers are a red flag. Step 2- ask why the entity or person is seeking to invest. Step 3- ask thorough questions about assets that appear in any financial documents they share with you.
Depending on your industry, an easy way to get these thorough answers is to employ ‘Know Your Customer’ (KYC) strategies or a full ‘Anti-Money Laundering’ (AML) framework. KYC and AML methods employ various verification, monitoring, and cross-checking procedures. These need to be airtight to prevent malicious individuals from slipping through your security net. Having thorough procedures might even help your case in the event of charges.
You don’t know much about Money Laundering SchemesIf Ozark has taught us anything it’s that money launderers are constantly developing new tactics.
“Money Laundering puts your company at risk; including your income, assets and employees. It is usually tied to criminal activity and some form of violence to support it. Possible criminal charges and reputational damage could destroy your business,”.
Money launderers can put illegal cash in your account, layer proceeds through wire transfers, convert cash to financial instruments, and make funds from illegal activities look legitimate by falsifying invoices or over-billing. Prepaid credit cards are also something typically used for these schemes that you may want to avoid accepting.
A typical way this happens is that a person places a large deposit on an order and then later cancels it. A refund is then given in “clean” dollars. The transaction would then seem legal and legitimate. Money laundering publications are made by the Bank Of Jamaica and the Financial Investigations Division often. These regulators are trusted sources to keep you in the know. The more you know and share with your team about these developments, the more likely you are to detect any attempts at money laundering through your business.
You ignore Due DiligenceDon’t be afraid to dive deeper into the backgrounds of potential clients/partners. If you find yourself unsatisfied with the responses they’ve provided, do your own research into their identities and claims.
Is their company registered with the local trading standards authority or a government office? This is particularly important if foreign countries are involved. Seek assistance from law enforcement if something seems suspicious. In Jamaica, the Major Organized Crime & Anti-Corruption Agency (MOCA) arm of the Ministry of National Security is well equipped to aid in such matters.
Your company doesn’t enforce formal Anti-Money Laundering Policies“Small businesses are often ideal targets as they often have less formal processes with little oversight,”. However, businesses of all sizes should employ formal policies within their anti-money laundering strategy. It is important to include accounting and cash handling procedures within these policies. At Symptai we also recommend implementing automated monitoring procedures to detect anomalies, doing periodic audits and designing processes to prevent any one group of persons from having total control of your systems.
Having these guidelines as a framework can dictate the decision-making process surrounding deals and partnerships with others. It will also let other team members know when they encounter suspicious activity.
You’re not intentional about data privacyBusiness privacy is everything; in some cases, it’s the heart and soul of the company. Keep it that way. Avoid sharing any financial details or data with unfamiliar individuals; particularly someone that has solicited you through an email or phone call.
Ensure staff is trained and aware of policies and procedures. Also have customer-facing signs for rules that directly affect them. Training courses and programs, such as those offered by Symptai, equip staff at all levels and departments with the knowledge and tools to make data privacy a priority in their organizations.
Also, be sure that you maintain security with all devices, including regularly changing passwords and not sharing them with anyone else. If you want to learn more about other types of security technology you could employ, check out some of our other articles or reach out to us for a company audit. Take the most important step and protect employees’ identities and roles, especially those involved in cash processes. Keep internal processes and verification checks on a need to know basis.
You’re an easy targetMoney launderers have a tendency to seek out businesses that are cash-intensive or that sell services or products that can not be easily tracked, for example, car washes, laundromats, bars, clubs and even churches. These business lines generate large quantities of cash, making it very difficult to tie funds back to product or service sales. This makes it easy to distort audits and hide any illegal funds being siphoned off. Launderers often take advantage of new business owners who lack experience and knowledge about the risks involved with certain types of transactions.
Is your business guilty of any of these mistakes? Avoid money launderers’ schemes by staying alert and informed. Reach out to a Symptai representative today and find out about AML techniques that your company could employ and how we can help you to fight financial crime.
Topics: Risk and Compliance
Marlon Thompson has over five years of experience in Anti Money Laundering Solutions, Business Assurance and Continuous Monitoring. Marlon serves as an Implementation Specialist, Data Analyst, Quality Assurance Analyst and Trainer. He is an astute Process Analyst who is responsible for identifying the components required to design and configure solutions that can be easily tracked for monitoring and progress.