Defence Against Money Laundering 

03/08/2022
Written by: Ieuan Leigh 

Introduction

With money laundering becoming a growing threat and criminals becoming more creative with ways to elude detection, how can businesses combat this and have a strong defence against money laundering? You would assume that screening every client and monitoring them long-term would be a time-consuming and complicated task. Well, for those who do it manually it is, but with advancements in software that automates these tasks staying safe, compliant, and adhering to the highest levels of due diligence is easier than ever. 

What is Money Laundering?

Before we discuss ways to defend your business against potential money laundering clients, it's essential to understand what money laundering is. Money Laundering is when an individual or an organisation takes steps or actions that conceal or hide the money they received from illegal activities, such as gambling, corruption or the selling of narcotics by attempting to convert it into a legitimate source. This is classified as organised crime. 

As a business, avoiding these types of clients is imperative if you wish to keep your license and your reputation and avoid a criminal conviction. Fortunately, technology can help make detection and monitoring easy, saving your business time and reducing your overheads. The UK government advises that if you run a business within the financial sector, you register with the anti-money-laundering scheme here.

Why is Anti-Money Laundering Important?

Now that we are clear on what Money Laundering is, we will discuss Anti Money-Laundering (AML). AML is the process regulated businesses such as solicitors, financial advisors and mortgage providers legally must perform to achieve compliance and adhere to the highest levels of due diligence by screening, monitoring and reporting suspicious activity on clients and individuals they belive are conducting criminal activity.

As well as the risk to businesses, Money Laundering costs the UK over £100 billion every 12 months. This also results in decreased confidence in our economy, which has global consequences. You can read more here about the consequences money laundering has and the steps taken to detect and prevent it.

Technology in the Defence Against Money Laundering

Years ago, screening clients for the Know Your Customer (KYC) and Anti-Money-Laundering (AML) checks took days, if not weeks! Often leading to poor client experience, which results in low customer acquisitions. This also costs your business time and money while staff collect and check documents. Believe it or not, this is still the case with many regulated businesses, often in the legal sector like law firms and solicitors, where there is a slow adoption of LegalTech software.

An exact contrast to this is the financial services industry, where AML software is abundant, with instances where businesses have created their own in-house tools to detect and prevent fraud and criminal activity. This is a peculiar trend as the software these businesses use is transferable to every market where the detection and prevention of money laundering are needed. 

With hundreds of use cases and case studies, it's clear that the legal sector is slow to adopt tools proven to save time and money and increase customer retention. With these sectors so heavily regulated and fraud becoming more sophisticated LegalTech software is no longer a nice to have; it's becoming a necessary tool in an area so closely regulated.

The introduction of open banking on a large scale is the latest weapon in the fight against money laundering. Used widely for capturing the client's proof of funds during the application for a mortgage or conveyancing. Open Banking has become the best tool a business can use to detect money laundering, preventing potential clients from hiding payments or providing doctored or fraudulent statements. Open banking offers one of the most significant leaps in AML technologies.

Conclusion

Today a business can be as risk-averse and compliant as they want, following every guideline. Without the aid of modern-day AML technologies, failure to prevent some level of money laundering is unavoidable, damaging your reputation and ability to operate in the future. Larger businesses such as magic circle firms have long adopted such technology knowing the risks and understanding the benefits they bring. A breach of AML for them could mean the end, where smaller businesses have been much slower to adopt as the risk is perceived less. It isn't. 

With fraudulent activity operating at every level, detection and prevention is more important than ever. Without the aid of modern technology, fraudulent activity will go missed, and the consequences could be catastrophic to any business, especially smaller ones. 

Validient is here to help any business in their defence against money laundering so do get in touch to see how we do it!

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