Money Laundering: A Growing Concern for Financial Institutions
As the financial sector continues to evolve, so does the threat of money laundering. In an effort to combat this growing concern, the government has implemented new guidelines aimed at preventing the illegal activity.
Integration: The Final Stage of Money Laundering
One of the most critical stages in the money laundering process is integration. This is where laundered proceeds are placed back into the economy as apparently legitimate business funds. Criminals use various tactics to achieve this, including:
- Realising property or legitimate business assets
- Redeeming shares or units in collective investment schemes
- Switching between forms of investment
Retail Schemes: A Target for Money Launderers
Financial institutions that deal directly with the public are particularly vulnerable to money laundering. Retail schemes, such as those that use cash to purchase investments, make it easy for criminals to dispose of illegal funds. Offshore businesses that accept cash are also at risk, making them potential targets for money launderers.
Who is Governed by the Guidelines?
The new guidelines apply to all financial services providers who offer a range of services, including:
- Banking
- Financial business
- Venture capital
- And many more
These providers must exercise care and diligence in assessing whether or not the guidelines apply to their transactions.
What Services are Covered?
The guidelines cover a wide range of services, including:
- Banking and financial business
- Venture risk capital
- Money transmission services
- Issuing and administering means of payment
- Guarantees and commitments
- Trading for own account or for account of customers
- Money broking
- Money lending and pawning
- And many more
When do the Guidelines Apply?
The guidelines apply to any transaction that involves an arrangement between two or more parties, when at least one party is acting in the course of business. They also apply to the formation of a “business relationship” with the purpose of facilitating frequent, habitual, or regular transactions.
Isolated Transactions: A Special Case
Isolated transactions should be treated like any other transaction. However, if circumstances are questionable and unexplained, identity verification and reporting may be necessary to prevent money laundering.
The Legislation: A Framework for Combating Money Laundering
The legislation specifically relating to money laundering is contained in the Money Laundering Prevention Act and the Proceeds of Crime Act. These laws provide a framework for financial institutions to follow in order to prevent and detect money laundering.
Conclusion
In conclusion, money laundering remains a significant threat to the financial sector. It is essential that all financial services providers understand their role in preventing this illegal activity and take steps to comply with the new guidelines.