Money laundering, often called white-collar crimes, is a heinous act where criminals conceal their illicit funds through legitimate financial settings. This process of concealing ownership of funds has a high share in the global economy of around 2 – 5%, supposedly $800 billion – $2 trillion. As Christmas is around the corner and businesses are making efforts towards growth, money laundering risks are sure to hold them back.
Holidays are the most favorites of financial criminals to hide their malicious intentions in a crowd of festivities. Therefore, businesses must bring robust AML solutions to increase caution against fraudsters. With digital onboarding and online payments being the new normal this Christmas, companies should take necessary steps to ensure secure services.
Establishing AML Systems to Detect Suspicious Activities
Criminals make both inter or intra-nation transactions to hide their proceeds of crimes by either making investments, buying products from e-commerce sites, and much more. Offshore payments help them conceal true sources of money more easily due to diverse regulatory anti-money laundering landscapes. In every way, criminals expose businesses thriving to attain a competitive edge in the market and earn high revenue towards severe legal repercussions. They face financial instability which in turn make legitimate customer vulnerable.
Fraudsters employ various money laundering techniques for escaping AML verification checks, from creating counterfeit profiles to establishing shell companies. Both ways, businesses, as well as customers, experience adverse consequences along with a loss of millions. Fake invoices, high-value purchases, repeated trading of valuable assets, and other such strategies further aid in hiding the dirty money. As a result, criminals bypass AML compliance to make their illicit payments look legitimate.
Businesses such as retail, trading, crypto, and others should stay aware of money laundering trends to restrict malicious transactions and ensure secure online services. The major red flags indicating suspicious financial activities involve the following:
No Visible Trace of Connection
Criminals are sophisticated enough to escape AML compliance and launder high sums of money without leaving any traces. For this, they choose businesses where they can skip providing referrals. Companies, specifically crypto and retail, often ask their customers that from where did they hear about their brand. This practice helps businesses build up more clientele. In case there is no visible trace of connection and the client is a complete stranger, the chances of AML security breaches are sure to increase.
The creation of shell companies and counterfeit profiles are commonplace as they greatly help in concealing illicit funds. With advanced document forgery techniques, criminals easily hide their true identities as well as sources of funds. Furthermore, fraudsters often target regions with lax AML compliance measures as they can easily escape regulatory scrutiny. Customers providing insufficient or incomplete information is another red flag for money laundering. While there is a flood of customers and transactions during Christmas, identifying secretive clients becomes challenging.
Third-party payment providers are seen increasing in the past few years with PayPal having the most share of around 41.87% in the marketplace. This is because they offer swift and secure payments throughout the Christmas holidays. However, these third-party payment providers are a prominent target of criminals to move high sums of illicit funds. Due to inefficient AML systems, they further leave enough for fraudsters to escape regulatory checks.
Businesses dealing with third-party payment providers, such as retailers, need to enhance their fraud prevention mechanism with AML solutions. As a result, they will be able to identify red flags associated with money laundering through intermediaries.
AML Security Solutions – Enabling Businesses to Stay a Step Ahead of Criminals
Considering the increase in Christmas scams such as payment fraud, money laundering, and illicit purchases, businesses need to upgrade their AML compliance controls. Integrating Artificial Intelligence (AI) and Machine Learning (ML) algorithms can help companies to keep up with changing trends this holiday season. Further ways in which AML solutions help businesses counter financial crimes and other related suspicious activities include the following:
- Performs Customer Due Diligence (CDD) before onboarding to identify risks of money laundering associated with the buyer
- AML screening across global sanctions, PEPs, and other watchlists for secure international services
- Transaction authentication with swift and error-free anti-money laundering checks
- Ongoing monitoring of financial behaviors to detect future chances of suspicious activities
- Streamlines AML monitoring and suspicious activity report submission to regulatory authorities
In the End
Businesses are all set to roll out attractive deals for this Christmas. While the marathon of festivities brings joy, an increase in fraudulent activities is triggering fear of security breaches. Hence, businesses need to enhance their anti-money laundering controls to restrict illicit actions. Furthermore, they can counter the spike in cybersecurity breaches and meet regulatory requirements by integrating AI-powered AML solutions.