As an FSP, you run the risk of being conned into money laundering schemes without your knowledge. The three-stage process that is commonly used for money laundering places an operational, reputational, legal, and financial risk on your business. It is therefore imperative that you safeguard your business from falling victim to fraud by being able to spot the telltale signs as early as possible.
What is Money Laundering?
Money laundering is the act of concealing or disguising the origins of profits from illegal activities so that it appears to have come from a legitimate source.
Stages of Money Laundering and disguise
There are three stages in which this disguise takes place:
- Placement is when ‘dirty’ money is placed in the formal financial system. For example, physically placing illegal money in the bank or purchasing goods with it.
- Layering – is the act of separating the proceeds from their criminal origins. Here money is transformed into different forms or ‘layered’ in an attempt to disguise the true nature of the funds. For instance, transferring funds to different onshore and offshore bank accounts.
- Integration – is when the funds are finally integrated into the financial system and are indistinguishable from other untainted funds. Examples include, purchasing luxury assets and making financial investments.
The earlier money laundering is identified in these three stages, the easier it will be to prove and prevent the event.
Here are five tips on how to identify and prevent money laundering from occurring in your business
- Familiarise yourself – take some time to read and learn about the basics of this crime and its consequences. Masthead offers an online learning FICA course which contains updated information on the FIC Act as amended and other anti-money laundering legislation.
- Know your customer – due diligence is key. Remember that this must be performed at the onboarding stage as well as on an on-going basis.
- Be wary of suspicious transactions and behaviour – look out for transactions and behaviour that ‘just don’t make sense’.
- Staff training – train your employees to look out for red flags.
- Keep updated policies – document and update risk assessment mechanisms to manage risks in your business. Ensure that your Compliance and Risk Management Programme is up-to-date.
Masthead hosts workshops and seminars regularly to keep financial advisors and their staff up-to-date with the latest regulatory changes. We advise you to attend a workshop at Masthead to familiarise yourself with the FIC Amendment Act. attendees will also get an opportunity to look at the typical questions asked during a FICA audit and identify any gaps within their own business. Visit the Masthead Learning Centre for more information on upcoming seminars.