Get smart over money laundering, retailers urged

Businesses need to get smarter in how they tackle money laundering or face the wrath of HMRC in the form of hefty fines, a legal body has warned.

Gordon Dadds, a legal and professional services firm, has claimed that the digitisation of money has created increased risks to business from money laundering.

Regulatory enforcement, both in the UK and Europe, is widely aligned. However, outside of Europe regulation is not joined-up, leaving countries like the UK open to criminal activity, it added.

Vast amounts of money are laundered through banks and other regulated businesses, which includes money from international criminal activity and corruption.

Alex Ktorides (pictured), partner at Gordon Dadds, said: “Digitalisation has made it far easier for organised crime syndicates to withhold money from the financial system and to transfer assets from what appear to be legitimate businesses and individuals to criminals.

“While regulation can be seen as a burden and businesses would naturally prefer less red tape, it provides crucial protection. However, they should be mindful that by breaching these laws businesses can be ruined through significant financial penalties; one large fine could be enough to put a firm out of business. Inevitably many managers have a tendency to do the bare minimum and see anti money laundering (AML) as a box ticking exercise. But due diligence should be taken seriously and businesses should be going above and beyond the necessary requirements.”

He added that businesses shouldn’t shy away from asking customers questions about the source of their funding as part of the AML process.

Businesses need to take a “risk-based approach” and consider the characteristics of a customer, the product and its distribution.

“The revolution in payments, transferring of money for holidays, business-to-business transfers or for sending money abroad has increased due to people wanting cheaper and faster payments,” he explained. “However, technology is always one step ahead of regulation, therefore businesses need to get smarter in how they treat this technology.

“It is not enough to want to do the right thing, or have weak processes or under trained staff as these leave businesses vulnerable and exposed to criminal activity. We cannot urge business owners enough to take action now, before it’s too late. Once you engage you find there is much you can easily and painlessly do to make a big difference to your AML compliance. Ironically, our view is that the blockchain and distributed ledger technology (if not the currencies in the short term) will provide much improved access to ‘know your client’ (KYC) information so there is nothing to be shy of provided you have access to expertise.”