Financial Crimes
Financial crimes are illegal practices conducted by individual criminals or groups to get economic benefits. There are multiple other crimes associated with financial ones. They can be done against a person or a business. Financial crimes have been in the spotlight in recent years globally, as they cause damages to the economy and society as well. There is a huge share of financial crimes in the worldwide GDP.
Every illegal job that is intended for getting financial benefits is known as financial crimes. Usually in financial crimes, one party is the beneficiary and the other is the victim. It normally involves the illegal conversion of the ownership of assets. Tax evasions and corruption are the primary initiators of financial crimes. Law enforcement agencies are always in search of mitigating these crimes. This is done by spotting and prosecuting the criminal entities in the system.
Types of Financial Crimes
Money Laundering
The illicit funds are concealed, then layered with the numerous transactions, and finally extracted in money laundering. The money obtained through multiple crimes like drug dealings, human trafficking, and weapons sale is needed to be laundered before use. Anti-Money laundering checks is done to give a legitimate source to the ill-gotten funds. After the money is laundered, it can be easily used in the system because it has all the supporting financial documents.
Money launderers use businesses that can not be audited clearly and have complicated financial records like casinos, car washes, and foreign exchanges. These businesses are very tough to be regularized and have the highest risk of financial crimes. The black and white money is mixed very efficiently and leaves no mark of money laundering. The ultimate beneficial owner (UBO) takes the clean money at the end.
Terror Financing
The provision of financial funds to terrorist groups or individuals is known as terror financing. Terrorist organizations need heavy funds to operate. They get funds from like-minded legitimate people. The way of terror financing and ML is the same and that’s why some time referred to as a similar term. Every country has prepared its own database of terrorists. Any direct or indirect economic help to the listed names will be regarded as terror funding.
After the 9/11 attacks, the rules on terror funding became very strict. Countries have founded different law enforcement authorities who regularly check the association of their citizens with the terrorists.
Global regulators have prepared guidelines against TF and ML. Countries and businesses are obliged to adopt these guidelines. The countering laws and procedures are known as AML/CFT regulations. Both the states and companies can be penalized by the international financial watchdogs and sanctioned as well. The total value of fines to the banks reached $10 billion in 2019.
Preventing Financial Crimes by AML Software Solutions
Both above-mentioned financial crimes can be countered through anti-money laundering. Below are the steps that are performed by the AML software solution:
- Know Your Customer (Identity Verification)
- Anti-money laundering screening (PEP and Sanction)
- Transaction Monitoring
- Background Checks
- Record Keeping
The businesses that are at risk of money laundering, especially financial institutions, have to deal with millions of daily customer requests and thousands of new customers. They can’t perform AML/CFT compliance by manual procedures. The growing trend for digitization has also pushed AML compliance to go digital. Now there are automated and robust AML software solutions in the market. The AML software solutions can perform all the required anti-money laundering in real-time without disturbing the business procedures.
The identity verification is done by examining the data on id documents and their data. Then the name is screened through AML watchlists and sanction lists. Ongoing monitoring and background screening undergo on the customer after his onboarding.
Wrapping it Up
The business channels needed to be secured from financial crimes to give seamless services to their customers. As security is the primary responsibility of businesses, AML software solutions can help in making the business environment crime-free.