How to Spot Tell-Tale Signs of Money Laundering Within Your Business

By John Dobson, CEO at SmartSearch,

Money laundering is a big issue in the business world and accounts for two to five per cent of global GDP, with nearly £1.6 trillion illegally laundered worldwide last year.*

As a business owner or leader, a key responsibility is to ensure the organisation remains compliant with the various regulations to protect the company and its various stakeholders. To make this process more straightforward, anti-money laundering service, SmartSearch, has identified five tell-tale signs of suspicious activity to help businesses prevent any foul play.

1. A lack of detailed information

A company that lacks detailed information about certain aspects of the business, particularly monetary transactions such as exact amounts of investments or payments to external parties, is a cause for concern.

This is more common in businesses operating with a lot of cash transactions, such as a cardless fast food takeaway, where additional money can be added in to boost turnover without being detected. To ensure there is nothing untoward, detailed accounts of all cash flow, including receipts, should be readily available and the same applies to payments to suppliers and staff.

1. Unusual or unplanned transactions 

Instances where a business suddenly engages in movements of money or assets, which don’t appear to add up, is worth investigating. If there have been any unplanned transactions on your business’ books, such as selling an asset for below market value or moving resources without a proper announcement or details of where it is going, this could be a sign of illegitimate activity. Also, if there is evidence of high frequency, high value and rapid movements of money and resources, this should be looked into further.

1. A change in behaviour

If there have been any sudden changes in the behaviour of clients or colleagues in relation to the movement of funds, you should do some digging. Quite often, in a case of money being laundered, transactions will be put through business accounts extremely quickly, likely bypassing all the usual operating procedures, and if this is the case, it should be flagged straight away.

This is very much the same in terms of clients’ behaviour or other external stakeholders as well. If they suddenly change their approach to how they want investments or transactions to be managed, without due diligence as previously agreed, this is worth investigating further.

1. Overly complex business structures

Complicated and illogical business ownership or leadership structures are common where money laundering is concerned, as this is an effective way of disguising the true ownership of money and assets. If there is no obvious explanation to why the company is structured in such a way, this should set alarm bells ringing.

In many cases of money laundering, businesses choose to use investors or shareholders overseas and so any activity with firms with no obvious geographical connection should also be scrutinised.

1. Working with high risk individuals

Exactly who your business gets involved with can be a sign of something untoward. In an instance where a company starts working with politically exposed individuals in a position of power, further investigation is certainly needed.

A Politically Exposed Person (PEP), who could be a current or former senior official of a government structure, is able to abuse their position in order to commit money laundering and so their activity should be monitored carefully, with any negative press about them taken into account before any business relationship is forged. Similarly, if a firm suddenly becomes involved in monetary activity in high risk, unstable countries, this is also something to keep an eye on.

John Dobson, CEO at SmartSearch, comments: “It is clear that money laundering is an increasingly prominent issue, and so the risks to businesses falling foul of illegal activity are now greater than ever.

“With the regulations becoming more strict all the time to try and crack down on this escalating problem, and the huge sanctions placed upon companies found guilty of money laundering, it is extremely important to be able to spot early warning signs of anything unusual. Exercising due diligence and flagging any concerns you may have will help you tackle any issues and protect your business, ensuring it remains well trusted and profitable long-term.”