The modern era is full of surprises for the people as well as businesses. Inventions and innovations are making it convenient to spend a happy life. Businesses are streamlining their processes with efficient AI-powered solutions. Moreover, data processing has become easier than ever.
Amid other benefits, verifying customers during onboarding has become simpler yet accuracy is guaranteed. On the other hand, the number of fraudsters is increasing every day with the advent of technology. AI, Deep Learning, and Machine Learning are not only helping companies only, but criminals are figuring out more sophisticated ways of fulfilling their malicious intent.
Due to the same reason, money laundering has increased over time. Did you know that there are stages of money laundering that criminals benefit from?
The blog covers all the stages of anti money laundering that help criminals to conceal the origin of their illegally earned money. Keep reading to know everything about them and how organizations can combat money laundering.
Stages of Money Laundering
There are three stages that fraudsters rely on for laundering money and all of them have been discussed below.
In the first stage of money laundering, scammers place money in different financial infrastructures like banks, casinos, online gaming, betting, and currency exchange.
All of the money is not placid at once in the same place, but small amounts of money are transferred to different companies. This hides their identity as well as the origin of money making it extremely convenient for launderers to fulfill their illegal activities.
Layering of Money
The second stage, i.e., layering of money takes into account different account tactics and transactions to keep the money safely hidden from regulatory authorities. Here, the small amounts of money are converted into bank drafts, money orders, or some big asset that conceals the origin of money.
Integration of Money
Now, the money illegally earned is ready to be circulated in the economy. Property dealing, shell companies, bogus invoices, and foreign bank accomplices are some of the methods for integrating money. Once a fraudster successfully reaches this stage, the chances of identifying it as a fraud diminish. However, if identified, tracing and following the legalities is one tough job to complete.
How to Combat Money Laundering
Combating money laundering may not be easy for financial institutions, the gambling sector, and online gaming websites. Furthermore, crypto investments are the latest way of laundering illicit funds. Hence, there is a dire need for solutions that can help all these sectors. Fortunately, know your customer verification and anti-money laundering screening are two of the best ways of combating money laundering.
All the sectors used by fraudsters for money laundering can add robust verification measures like video KYC, and monitor all the transactions so that criminals do not perform any illegal activities. Otherwise, the number will rapidly grow in the future.
Digitally verifying your customers is the new way of combating crime. The manual processes have been eased with advancements in technology and now, the majority of organizations are planning to add virtual KYC and AML checks so that fraudsters are filtered before they can cause any trouble for the company.
The process is convenient, time-effective, and saves costs as well. Moreover, identifying fraudsters is not a big deal if modern technology is used for verifying documents and the customers’ backgrounds.
Money laundering is a rapidly growing crime that every bank, gambling platform, online gaming, and fintech company has to experience if there are no measures taken for preventing it. Fraudsters have developed three stages of money laundering that make it convenient for them to stay hidden and transfer their illegally earned money to other accounts.
These three stages include the placement of money, layering of money, and integration of money. Each stage has its consequences for the company or bank. As soon as the launderer reaches stage three, the chances of tracing the origin of money diminish. Protecting all industries that criminals target for money laundering needs robust verification measures to protect their business and customers.
KYC and AML check not only to make your platform credible for use but also ensures enhanced customer experience and customer attraction. In a nutshell, organizations can add verification to combat money laundering from the core.
Possible risks posed by money laundering
Money laundering poses risk to monetary institutions and some of these thefts are in the design of monetary losses as well as reputational losses. By permitting laundered money into the financial structure can break AML laws and regulatory authorities which can occur in non-compliance penalties for the monetary sector, hence, economic losses. Unquestionably, technologies are making installment processing secure, likewise, AML KYC solution is becoming rising popular.
Clients, financial companies, and society as a body are badly harmed by the outcome of money laundering. Monetary companies are primarily exposed to the threat of financial violations as important stakeholders in the business may encounter prison time in a state of failing to meet AML compliance.
Furthermore, once stated, monetary institutions may suffer client trust. By neglecting money laundering activities, world economies can fail and nations with limited management and legislation enforcement may grant criminals effortless entrance to businesses to perform more crime.
Nevertheless, each time a money laundering case becomes recognized the reliability of the governmental foundation is additionally vulnerable.
AML program gives monetary institutions the possibility to execute ongoing client screening. On-going AML is powered by artificial intelligence and machine learning algorithms for managing in-depth AML monitoring of customers to acquire complete risk profiles which ultimately limit the violations of money laundering and other monetary crimes such as fraud and terrorist financing.
Monetary businesses can stay one step ahead of fraudsters and can also meet regulative requirements. Ongoing anti-money laundering is examined as one of the most beneficial methods by global corporations to screen customers as it not only preserves expenses and sources but gives accurate verifications. The anti-money laundering databases are modernized on a regular basis to support customer risk profiles and build flexibility with authoritative background information.