Six ways to spot money laundering in your business

EU legislation continues to target money laundering and terrorism financing. Corporate crime expert Aziz Rahman explains why these tough new laws should act as a “wake-up call” for finance professionals. Here's an action plan to help you spot signs of money laundering.

Does your accountant know everything about your business finances? With the EU’s ongoing drive to stamp out money laundering and terrorism financing, cleaning up your finances and keeping things transparent is becoming increasingly crucial.

The European Commission announced an action plan earlier this year, following the adoption of the Fourth Anti-Money Laundering Package in 2015. Both are clear indications that the authorities are desperate to prevent unlawful money from being hidden within businesses.

With the maximum penalty for money laundering set at 14 years, Aziz Rahman, senior partner at corporate crime defence specialists Rahman Ravelli, warns that finance specialists simply must know how to prevent this kind of wrongdoing.

“If we are being honest, the new EC regulations could be seen as a wake-up call to anyone who has been sleepwalking through business unaware of money laundering risks – but everyone should, by now, be alert to the dangers,” he comments.

Are you at risk?

According to Rahman, you can identify instances of potential money laundering by asking the following six questions:

  1. Has someone been vague or reluctant to talk about the exact sums of money involved in a deal, or who the investors are? You need to flag it up.
  2. Have some unusual instructions or conditions been introduced into a deal? Find out why.
  3. Has somebody contacted you out of the blue to express an interest in investing money into your company? Do your research. Do they have an ulterior motive?
  4. Have there been sudden changes to your working relationship with partners or other businesses? Do some digging.
  5. Has money been moved without a proper announcement of where it’s gone and why, or has there been a request to use a different account? These are clear warning signs that you should act on.
  6. Have assets appeared suddenly or has somebody floated the idea of making a loss? Also, if someone has asked to make payments in cash, you should immediately be on your guard.

Even if you are completely innocent and money was being moved around behind your back, you can still receive a substantial penalty if your business is taken to task.

A preventative action plan

As well as asking the six questions above, Mr Rahman offered a six-point action plan to ensure money laundering cannot happen on your watch.

  • Devise a clear anti-money laundering policy and appoint an anti-money laundering officer who is aware of the company’s legal obligations to report anything suspicious to the authorities.
  • Make thorough checks on the identity of a client, trading partner or anyone else involved in moving money into, out of or around your company.
  • Take the time to identify the real beneficiaries of a deal or the exact nature of a business relationship between two parties.
  • Introduce accounting and cash handling procedures into the workplace that make it as hard as possible for money laundering to happen within your company.
  • Enforce a no-cash policy on transactions of a certain size.
  • Appoint senior staff to scrutinise the source of funding for deals or investment – or devise a procedure for third parties to disclose their funding sources.

Aziz Rahman is a senior partner at corporate crime defence specialists Rahman Ravelli.

The Panama Papers and the possibility of money laundering

Working with more than 100 media outlets through the International Consortium of Investigative Journalists, a data company sorted through 2.6 terabytes of data that linked wealthy individuals and powerful politicians to the Mossack Fonseca, a Panamanian law firm known for creating shell companies.

While this may not automatically suggest wrongdoing, the possibility of using shell companies to shift money back and forth for tax evasion (among other things) is a very real possibility.

Celebrities known to be involved in the Panama Papers data leak include Simon Cowell, Sean Connery and wife Micheline Roquebrune, and Iceland’s prime minister Davíð Gunnlaugsson, who resigned a few short weeks after the leak.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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