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What Is Money Laundering And How Can It Affect Your Business

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Criminals are everywhere, and you’ll never know when your business may be victimized by someone who is attempting to launder money. It’s therefore essential for you as a business owner to be cautious in every business transaction you enter into with other people.  While the issue of money laundering has become more familiar in the recent years, having an in-depth understanding of this subject matter is still of utmost importance. So here’s what you need to know about money laundering and how it can affect your business.

What Is Money Laundering All About?

In simple terms, money laundering is a process where activities and transactions are used to hide the real source of money. In most cases, money laundering happens when an illegal business enterprise attempts to make dirty money (from unlawful activities) look clean.

  • Furthermore, getting the cash into the financial system without having to reveal the actual source of funds can be considered the primary principle of money laundering.
  • For instance, a good example of this is drug dealing. A person pays the transaction with cash, so when the latter gets into the system, the same person isn’t required to reveal where it came from. To better understand how money can be laundered, here are the three basic steps in the money laundering process:
  1. Placement – It’s an act of placing illegal cash in the banks. In other words, the money is deposited into the financial system usually in small deposits.
  1. Layering – This means the distribution or dispersion of the illegal money.
  1. Integration – This takes place when the money is released and used to buy items such as businesses and even houses.
  • While money laundering is an international problem, it’s also considered as a criminal activity. For instance, the Money Laundering Control Act is the primary law that makes money laundering a federal crime in the United States. As simply stated, this law prohibits criminal acts involving financial transactions who try to conceal the origin, the owner and the one controlling the funds.

How Can Money Laundering Affect Your Business?

Practically speaking, money laundering is a criminal offense, can damage the integrity of your business as well as the financial sectors. As criminals get to spend the laundered money without repercussions on their end, this means the opposite for your business. The effects of money laundering on your company include:

  • More fraudulent business transactions
  • More misappropriation of funds which means that more employees will lose their pensions when the company fails
  • More drugs-related crimes
  • More drugs on the streets
  • More law-enforcement agencies to work beyond their means
  • Most importantly, legitimate business owners like you will lose a general sense of morale. This is because although you’re not breaking the law, criminals out there are making enormous profits than you do.

How To Protect Your Business From Money Laundering?

If you do business in cash, you should be wary of where the money is coming from. This means you need to know your customer first before doing business with them. Here’s a quick guide on how to protect your business interest from money launderers:

  1. Never hesitate to ask questions from your customer or business partner. Ask about the origin of the money and most importantly, the investors involved in the transaction. Ambiguous answers may mean a red flag.
  1. Know some money laundering tactics. You’ll be able to safeguard your business from money laundering if you learn some information about it.
  1. Conduct investigation of anyone involved in your financial transaction. As a business owner, you’re duty-bound to ensure that you’re only dealing with legitimate businesses. Conduct background checks with due diligence to see whether the people you have business with have been previously charged with a criminal offense.

In reality, your business, whether large or small, can be a victim of money laundering by criminals out there. This is why you should always be on a lookout when it comes to your business dealings. If you’re a business owner who wants to gain more legal knowledge about this matter or someone who has been allegedly charged with money laundering, consulting a licensed lawyer can be the right thing to do.

Vicki Haskett

Vicki is a law writing enthusiast who’s had over 25 years of experience in her field. She enjoys sharing her experiences with those who wants to learn more about the legal world, and hopes her pieces could help her readers expand their horizons. In her spare time, she spends quality time with her family and friends.

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