1. What methods are used to launder money?

The various methods used to launder money include: Using smurfs, mules, or shells Gambling Investing in real estate and then selling it Investing in jewellery and moving it to other jurisdictions Online auctions and sales Virtual currencies Anonymous online payment services Fake identities Counterfeiting

2. Which is the most common method or easiest method used by criminals for money laundering?

The most common method of money laundering is using smurfs, shells, or mules. Smurfing means dividing large sums of money into smaller transactions. Mules are individuals smuggling money. Money launderers create shell companies to hide illegal transactions and evade taxes.

3. What businesses are most used for money laundering?

Businesses primarily used for money laundering are: Financial institutions Real estate agents Dealers in precious metals and gems Trust and company service providers Lawyers, notaries, and other legal professionals Accountants and auditors

Checklist for AML Compliance: Best Practices for Anti-Money Laundering Compliance

How do you track the progress as far as complying with anti-money laundering is considered? In order to make your compliance program more resilient, cost-effective, and efficient, you need to follow best practices for anti-money laundering compliance and use checklists for AML compliance extensively.

This article is going to suggest some of the best practices you can adopt in order to comply with your AML programs. So without wasting much of your time, let us begin with the same.

Best Practices For AML Compliance

Here are the best practices that you have to follow in order to comply with the Anti-Money Laundering Laws and Regulations.

1. Anti-Money Laundering Compliance Fundamentals

Every jurisdiction has its own set of requirements, but there are a few practices that form the ground rule for the compliance of Anti-money laundering practices.

Do not try to overlook the importance of written Anti-Money Laundering Policies. AML compliance is not something you have control over in order to improvise it. You must first understand your AML policies well, then pen it down for your staff, business executives, and regulators. While making all your staff aware of the guidelines, you must ask a few questions to yourself so that you don’t have to compromise on the authenticity and efficiency of those policies.
What type of KYC records do you have?
What is the screening mechanism?
Is the customer due diligence process efficient?

What communication procedures do you adopt?
What are your record retention policies?
You must have a designated individual who is responsible for the program and its efficiency. That one individual is responsible for ensuring that all the processes are followed well and are being updated on time.
In addition to that, the officer also has to look out for proper preparation of reports, adequate training and development, and lastly, that the entire system is working smoothly and without any hassles.
For the position of an AML compliance officer, you must consider someone from the senior-level management because they have both the powers and the potential to influence the qualitative as well as a quantitative measure of your business.
Every employee of your company who deals with transactions or customers directly or indirectly needs to understand the policies and procedures of your company.
All the employees must be well aware of the techniques used by the money launderers, checks they should make, legal requirements, and how to report any kind of suspicious activity.
However, it is crucial for you to note that AML training is an ongoing process in order to keep your staff informed and vigilant to ensure that the entire program is up-to-date.
Another vital aspect of that is reviewing. If you think everything is working pretty and there is no need to check your daily operations and efficiency, you are committing a serious mistake.
By the time you will start witnessing a problem or a hassle in the system, it will be too late. To avoid this situation, you must have an independent expert who is not directly associated with your daily operations but can monitor and review your processes on a regular basis.

2. Red Flags of Anti-Money Laundering Compliance

There will always be some signs that clearly establish that something is not right in the system or the process. Money laundering is all about bringing the illegalized money back into the market after legitimizing it through several means.

Here are a few unusual activities/red flags that you must control:

Unusual large cash transactions.
Enhanced frequency or level of transactions in multiple accounts to divide the significant amount as per the thresholds.
Spikes in amounts and activities.
Transactions associated with businesses that deal with vast amounts of cash on a daily basis, for instance, through gambling.
Transactions associated with several jurisdictions that have a history of money laundering activities.
Transactions associated with businesses or individuals that almighty be potential money launderers.

You can experience these activities at an early stage of the Customer Due Diligence (CDD) process or via an ongoing monitoring process.

At the time of onboarding a client, normal and baseline information like the type of account, expected transactions, and sources of funds should be gathered to avoid last-minute chaos.

However, it is essential for you to note that irrespective of internal examination or external reporting to the regulators, the information mentioned above is not enough to tag the activity or the transaction as a red flag.

3. Anti-Money Laundering Compliance Screening

One of the best ways to eliminate risk or reduce its impact is first to identify the scope of any sort of risks in your system and take mitigative measures at the right time.

For instance, you might want to perform a comprehensive identity verification check that has the potential to reduce the risk or scope of any fraudulent activities.

This verification check has the power to keep you safe from the threat of dealing with illegal money, breaking the rules of compliance, and many more.

People with ill intentions or the idea of fraud on their heads are getting more and more sophisticated these days.

Terrorists and money launderers are getting proficient in identifying the weak links or the loopholes in your systems which in return helps them in hiding their authentic sources of income or funds and also their relation to it.

You can block access to the individuals who want to bypass your safeguards, making your prevention systems even more secure and robust.

4. Anti-Money Laundering Compliance Monitoring

Compliance is not complete merely after the initial onboarding process. You have to keep a constant eye on the entire process. Monitoring is basically the analysis of ongoing and continuous activities to ensure that all the other activities are in compliance with each other.

You need to keep an eye on a few activities like exceeding thresholds, change of status, suspicious activities, surveillance of employees and staff, recording of the communications, new regulations, trade data, market trends, and transaction monitoring needs of various other markets.

Financial institutions must monitor all the activities thoroughly in order to ensure that no fraudulent activities are going on. In addition to that, it also restricts terrorism funding, and money laundering is not entering their financial systems.

5. Risk Management for Anti-Money Laundering Compliance

With the rate of regulatory and technological change, determining modern-day risk assessment is not the only motive. Instead, it is more about creating dynamic, adaptable, and defendable procedures and policies.

In order to make your business grow, you have to mitigate the risks even before it gets into the power of position to destroy your business.

Therefore, in order to identify the possible quantifiable risk, you must constantly monitor all the activities and take data-driven and not guts-driven business decisions.

6. Integrating Anti-money Laundering Compliance Technology

Merely hiring dedicated staff to manage costly manual compliance activities is not enough. You must utilize the potential of automation software instead of using rather wasting manual intelligence and energy.

Here are the few technologies and their eternal use that you might want to add to your existing systems in order to enhance the efficiency of the entire process.

Look out for already proven efficient technological options like blockchain.
What is the utility of adding up a new state of technology?
How quickly after integrating the latest technologies can you expect some noticeable results.

It is crucial for you to understand that automation won’t eliminate the need for manual powers and judgments, especially in investigations. But with the help of automation, you will be able to reduce regulatory risks, streamline the process, and restricts unnecessary overheads.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

Micro money laundering: The New Kid on the Block

Micro-money laundering has made it even more challenging to identify the fraudulent transactions carried out in small amounts several times.

Governments worldwide have implemented stricter rules and regulations for AML compliance. There’s also increased awareness on the part of the financial institutions as they are being urged by compliance authorities to follow the AML rules and regulations.

The government is monitoring the traditional financial transactions. But the criminals are now adopting new ways to launder money. With the advent of technology and a massive increase in online transactions, it has become difficult to trace the source of the funds obtained from criminal proceeds.

What is Micro Money Laundering?

Micro money laundering involves frequently laundering money in small amounts using digital channels. The small amounts are transferred to prevent detection, and transactions are made to appear regular. The illicit money is not transferred via big or small projects, but they are spread in smaller digital transactions done every day. It makes it difficult for governments to trace every small transaction and identify the risk of money laundering. 

Digital channels are evolving and available in abundance. Multiple payment channels are available today, making it easy for companies to do business and making it effortless for consumers to make payments and buy goods and services online. But criminals have found this evolving digital space attractive, and they are devising new ways to launder money, and the new kid on the block is micro money laundering.

The digital landscape is continuously evolving, and criminals keep pace with the new technology to devise new ways to launder money. Micro money laundering is on the rise as the criminals take advantage of the loopholes in the AML compliance framework and target online users who are entirely unaware of the fraudulent activities that the criminals resort to launder their money.

They unknowingly fall prey to the criminals who target them to launder money online. 

But the fact is that the regulators and authorities are now coming to terms with how criminals are adopting new ways to launder money and indulge in terrorist financing. They need to identify the emerging risks and thwart the challenges arising out of online transactions, which remain mostly anonymous.

The criminals have been using traditional mechanisms for money laundering, such as regulated financial systems, offshore accounts, and shell companies. But now, they have diverted their attention towards online transactions, with transfers in small amounts done multiple times to evade government scrutiny.

Criminals always take advantage of the anonymous nature of the internet and commit fraud. They carry out massive volumes of micro-transactions every day. Each small transaction goes unnoticed, but the overall amount is a cause of worry as criminals become successful in gradually laundering vast amounts of money in multiple transactions.

How is micro-money laundering done?

The new digital frauds have become a favourite of the criminals who are continuously devising new ways to launder their ill-gotten money. Today it is common to buy and sell in-game currencies, and criminals think of it as an opportunity to launder money.

An instance of micro money laundering came to light when the criminals targeted Fortnite- a highly popular game. They used the game for money laundering with stolen credit cards to buy and sell the in-game currency.

They created Fortnite accounts using stolen credit cards, bought the currency, and made it available to other players to sell them at a lower price within the game. To evade the regulators’ attention, they sold them on C2C sites, eBay, or transacted on the dark web.

Another example is of using online job portals such as Fiverr. The criminals create an account on such websites to make fake job requests. They search for services that are offered at a particular fee. They log on to the same site with a different user account and a different IP address to reply to the same job offer.

The amount is paid to an escrow account of the website, and then the first account creator authorises the second account holder (which is the same person) to perform the task advertised. After the work is completed (as shown by the job seeker), the first account authorises the platform to release the payment, and the second account receives the payments. The sender and the receiver are the same, and this modus operandi is rampantly used by criminals in online job markets.

Reason

One reason criminals are flourishing in micro money laundering is lack of awareness as it is a new method that criminals have adopted. AML training should include creating awareness about it and preventative measures. Businesses and enforcement agencies should work together to identify such emerging threats and combat them successfully. 

One of the primary reasons is that AML compliance is put on the backburner as companies have other core activities to ensure business continuity. The online marketplace is continuously evolving, and companies are scrambling to get new products to augment business growth. But all in this hustle, they forget the security of their businesses. Equally enthusiastic technology-savvy criminals jeopardise it. The only difference is that they abuse technology for their unlawful gains.

The Way Forward

Technology can come to the rescue of the authorities, regulators, and business organisations that should use it to combat money laundering and terrorist financing. The AML software can automatically identify unusual transactions, irregular patterns, or unusual consumer behaviour, letting the business know that it needs attention and investigation. Manually it is impossible to track the billions of microtransactions, and the criminals get a free run. However, technology should be used daily and right from the beginning – while verifying customers during the onboarding process. It can go a long way in preventing money laundering.

The KYC process- Know your Customers, CDD-Customer Due Diligence, EDD-Enhanced Due Diligence, and all other procedures part of the AML compliance program should be diligently followed using technology. It will drastically reduce the number of money laundering cases. Training is also necessary to identify unusual transactions and take the appropriate actions to prevent them

It would be best to rely on AML consultants to improve the AML compliance program and identify money laundering risks. Some measures include choosing the right AML software, AML Training, and setting up an in-house AML compliance department. Businesses can also outsource other AML compliance activities to stay AML compliant and be ahead of the curve. 

Directors and/or senior management demonstrate overall responsibility and awareness of AML/CFT matters within the entity. The companies must also mention whether the Board and/or senior management receive regular AML/CFT reports from the Compliance Officer.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

AML Periodic inspection: What to expect when authorities come for a Periodic AML Inspection

The team representing the Ministry of Economy UAE has started visiting companies to conduct periodic AML inspections regarding the implementation of AML/CFT procedures. As a part of their AML periodic inspection, the team checks whether the company has implemented suitable procedures for anti-money laundering and combating terrorism financing.

The Ministry’s notification directs the companies to cooperate with the inspection team during the visit. This notification is in regards to the Federal Decree No. 20 of 2018 and Cabinet Decision No. 10 of 2019 for the implementation of Federal Decree law No. (20) of 2018 on anti-money laundering. The financial institutions and DNFBPs are required to fill in the checklist with accurate details and submit a signed copy to the inspection team during their visit.

DNFBPS must fill in the following information in different sections as asked in the checklist:

Company details

Legal name
DNFBP category
Licensing Authority, Number, and Date
Address
Inspection Date
The name and signature of the authorized signatory, which can be a Compliance Officer or Manager
Ownership structure including details on ultimate beneficial owner (UBO)
Description of the products and services you offer and types of customers

General policies and procedures

In this section, you have to mention whether you have prepared and documented AML/CFT policies and procedures. If you have those, you have to share your AML Policy via email. The Ministry also intends to know whether you have circulated these procedures and policies to all your employees.

Internal risk assessment

In this section, the Ministry requires you to mention whether you carry out and document an internal risk assessment to identify the money laundering risks to your business. In the document, you need to provide details on the risk categories included in the risk assessment, such as:

Country risk
Customer risk – Check our infographic on customer risk assessment
Delivery channels risk
Products, services, and transaction risk
Results of the National Risk Assessment of the UAE’s money laundering and terrorist financing risks

Governance

In this section, the Ministry intends to know whether the Board of Directors and/or senior management demonstrate overall responsibility and awareness of AML/CFT matters within the entity. The companies must also mention whether the Board and/or senior management receive regular AML/CFT reports from the Compliance Officer.

Compliance Officer

This section requires information on the Compliance Officer. The first point you have to mention is whether you have appointed a compliance officer. If the answer to it is yes, the Ministry requires the name and email address of the Officer.

The Ministry also intends to know whether the company has provided all the relevant details and documents to the Compliance Officer, including financials. Also, you must talk about the reporting manager of the Compliance Officer.

Customer acceptance and onboarding

This section requires companies to talk about their customer onboarding process and policies. The Ministry intends to know whether you have:

A Know Your Customer (KYC) form, including details such as name, address, contact details, profession, and copy of identity proofs. Check out what is know your customer (KYC) and best practices for KYC compliance. Also, check out our article highlighting the importance of identity verification.
Implemented procedure to identify whether the potential customers are /related to Politically-Exposed Persons (PEPs). Check out our guide to Sanction and PEP screening
Established mechanisms to categorise your customers as high risk, low risk, and medium risk. Check out our infographic on the customer risk assessment program
Whether the policy is in place for Identification of the true beneficiary of your customer. Read our complete guide to the Ultimate Beneficial Owner verification

Cash transactions

In this section, the Ministry wants to know whether you allow cash transactions in your business. You must mention the details of specific controls and procedures implemented in your company for cash transactions.

The Ministry intends to know from you details on:

Percentage of cash transactions of the company’s total transactions
Cases of cash transactions of more than AED55,000.0 during the last 24 months

Suspicious transaction reporting

In this section, the company must answer the following:

If they have signed up to the Financial Intelligence Unit’s goAML platform. Check out our goAML pre-registration guide and goAML registration guide
If they have submitted any suspicious transaction reports via the platform; if yes, how many
If they have a documented list of red flags or indicators for suspicious transactions; if yes, share it in email

Record keeping

The Ministry intends to know if you keep all records, documents, materials, and data of all local or international financial, commercial, and cash transactions for a period of no less than five years from the date of completing the process or the end of the relationship with the customer. Check out our infographic on AML Compliance Requirements in UAE

Training and awareness

You must provide information on the regular and appropriate training programmes you conduct for your employees in line with the nature and degree of risks of its activities to train employees on AML/CFT procedures. You must describe the training and its format in detail. Check our article emphasising the importance of AML training.

Targeted financial sanctions

This section allows the Ministry to know if your customers are subject to targeted financial sanctions by the UAE government, the UN Security Council, or any other relevant body. You must also inform any screening tool that you use to check the same in this form.

You must mention if you have ever identified exposure to targeted financial sanctions designated persons. If yes, what were the actions the company took, including but not limited to asset freezing, reporting to the competent authority, etc.

Financial activity

In this section of the checklist, you must list all your bank accounts and related details such as name, location, IBAN, etc. The Ministry wants to know if you faced any issues with any banking institution, along with the relevant details.

Conclusion

All these details will help the inspecting team know about the procedures in place on your premises related to AML/CFT. This proves your commitment to abiding by the AML law and dedication to reducing money laundering activities.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

The Complete Guide to the Ultimate Beneficial Owner Verification

Ultimate Beneficial Owner (UBO) Verification

As per the KYC onboarding and remediation process, customers must be verified for Ultimate Beneficial Ownership. It is necessary to comply with AML/ CTF sanctions and regulations and meet the tax compliance legislation and standards. UBO is defined as an individual who benefits the most and has ultimate effective control over an arrangement– a legal entity or a natural person, irrespective of the chain of control is UBO – Ultimate Beneficial Owner. UBO check is necessary for different entities such as banks, brokers or dealers in securities, commodities, hedge funds, futures commission agents, blockchains, currency exchange officers casinos, digital lenders, FX, and binary options brokers.

CDD – Customer Due Diligence has come into the spotlight with the several scandals unearthed in recent times, such as the headlines grabbing Panama Papers and others. More emphasis is being laid on CDD now. Increased regulatory compliance helps in improving ownership disclosure and transparency. It is critical to follow the new compliance regulations, as it can put a business on the verge of getting a bad reputation and increase the risk of financial loss.

The legal arrangements are complex, and detangling them is also cumbersome. Several factors hinder UBO verification, such as lack of clarity on multiple beneficial ownership outlines, non-co-operation, and other factors that make it difficult to carry out the process quickly and prevent compliance with the KYC process.

What is UBO (Ultimate Beneficial Owner)?

The UBO is the Ultimate Beneficial Owner of a legal person.

A natural person can only be a UBO. The Ultimate Beneficial Owner owns or controls the legal entity or a natural person who conducts the transaction with the firm. The UBO may or may not be known as the owner of the business.

Reporting entities in the UAE are required to perform UBO checks to identify the real person behind the transactions. The Ultimate Beneficial Owner checks are important to prevent the business from money laundering and terrorist financing risks.

As per the UAE regulations, any person owning more than 25% of shares, controlling more than 25% of the voting rights, or the person exercising control over the company is termed as UBO.

UAE Cabinet Decision No. (58) of 2020 Regulating the Beneficial Owner Procedures

The UAE Ministry of Cabinet Affairs (‘Cabinet’) published Cabinet Resolution No. 58 of 2020 on the regulation of the Procedures of the Beneficial Owner ‘ (‘Resolution 58’) as part of the UAE’s shift toward greater openness and to be in line with global norms.

Resolution 58 mandated that entities in the UAE (with few exclusions) gather and retain relevant, accurate, and up-to-date information on their genuine beneficiaries (‘Beneficial Owner ‘), as well as inform the authorities. This law establishes a beneficial ownership framework for UAE “mainland” and free zone entities, as well as requiring the maintenance of necessary registers. As per Article 5, UBO is anyone who owns or controls, whether directly or indirectly, through shares or bearer shares:

25% or more of the legal person’s share capital;
or 25% or more of the legal person’s voting rights.

This could be accomplished through a control chain or by having the power to appoint or remove the majority of the company’s management.

If no natural person meets the foregoing conditions, or if there are any uncertainties about who does, the UBO is the natural person who has power over the legal person by any other methods. If a natural person cannot be identified, the UBO is the senior manager of the legal entity.

The main reason for UBO verification is to arrest financial manipulation, money laundering that goes into funding terrorism, and financial crimes hidden behind the garb of legal entities.

Final CDD Rule

The CDD final rule amends the Bank Secrecy Act regulations, which improves financial transparency; It will help prevent money laundering and misuse of legal entities to hide the illegal activities of funding criminal and terrorist activities. The CDD rule works on four elements which require financial institutions to maintain written policies and processes to perform the following functions-

Identification and verification of the customers’ identity.
Identification and verification of the UBO of the companies opening accounts.
Create a Customer Risk profile by understanding customer relationships.
Regular monitoring of transactions to detect and report suspicious transactions. Update the customer information regularly.

Any individual who owns 25 % or more of a legal entity and the individual who controls the legal entity must be subjected to verification of beneficial ownership information.

UBO International Standards

The FATF: Financial Action Task Force is an organisation that keeps a tab on global money laundering and terrorist financing activities. It lays down the international standards that aim to prevent illegal financial transactions. Two hundred countries agreed to the rules established by the Financial Task Force for beneficial ownership in 2003 and 2012. The 4th AMLD and CDD rules are applicable, but several countries adhere to the terms laid down in the international treaties that require beneficial ownership declarations. The organisation regularly keeps a vigilant eye on the money laundering and terrorism financing methods and improves its standards to combat the challenges of evolving money laundering techniques.

As a result of the FATF study, there has been massive awareness, and legitimate governments are targeting corruption. The emphasis on obtaining information on beneficial ownership due diligence has increased more than ever before, serving many purposes such as increased financial transparency, preventing money laundering, and stopping funding of terrorism and unlawful activities.

Ultimate Beneficial Owner Step-by-Step Process

You need to follow the unique compliance standards for each country in which the business is operating. But there are a few standard procedures that must be followed to develop an effective UBO program strategically.

1. Obtain the firm's credentials

Complete records of the companies have to be provided, such as company’s names, address, official status, top management employees and verify the records’ accuracy.

2. Identify Ownership Structure and Percentages

It’s crucial to know about the entities who have a stake in the company, directly or indirectly via another party.

3. Identify Beneficial Owners

Identify UBO by determining the entity or natural person’s ownership interest or management control – total percentage of shares, ownership stake, management control, and verify if any of it falls under the ambit of UBO UAE.

4. Perform AML/KYC checks on all persons identified as UBOs

Companies can adopt this vigilant approach and prevent the misuse of the internet to launder money and fund criminal and terrorist activities. Financial institutions can use AI and ML to avoid criminals with AML software. Modern technologies such as Blockchain can prove to be effective in preventing money laundering and ensuring AML compliance.

Ultimate Beneficial Ownership and AML Compliance

Automated solutions are the futuristic way of compliance with the AML/ CFT requirements as they make the detection and validation of UBOs a seamless and quick process.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

Balancing the jewellery customer experience and AML compliance requirements

Banks, financial institutions, and DNFBPs need to comply with national and global AML/CFT regulations. Even customers judge companies based on their compliance with regulations. So, complying with AML/CFT regulations is your legal as well as ethical duty that also builds trust in customers’ minds.

The KYC, CDD, and risk assessment measures under these regulations require you to collect information on customers before onboarding them. You must maintain these records and keep updating them. You also need to assess the risk levels of all customers to prepare a risk profile. But, the problem arises when in the process of complying with these regulations, customer experience suffers.

This is a serious problem for jewellers because there is heavy competition in the jewellery business. And customer experience is a key point of differentiation where you can gain an advantage over your competitors. If you do not involve in KYC, you may face money laundering risks; if you spend time on KYC, your customers may be disappointed.

Let us explore how customers experience difficulty and what are the possible solutions to improve it:

Why is KYC essential in the jewellery business?

Customers might pay in cash for large jewellery purchase transactions. The source of this money is unknown and unaccounted for.
There is a possibility of customers selling stolen jewellery in the market; its source is not known.
Money launderers use jewellery as a form of currency to exchange it with other financial products that might be illicit.
Cross-border and multi-jurisdictional jewellery transactions with different compliance requirements that have the involvement of money launderers or criminals.

With all these possibilities, it becomes essential for jewellers to practice the principles of AML and CFT. Specifically, knowing your customers is critical to reducing the likelihood of money launderers’ involvement. Jewellers must also review the existing customers’ accounts and identify gaps in the onboarding process to ensure compliance with KYC.

What problems arise in the KYC and CDD process of jewellers?

When potential customers come to the shop for purchase, you do not know anything about them. When they are trying to make a purchase, you stall the process midway to obtain all information about them for KYC.

Getting information such as name, contact details, profession, and proof of identity is the easy part of the process. Still, some customers would not like to divulge all this information for fear of data leaks.

The process becomes longer when jewellers collect more detailed information such as the source of funds, beneficial ownership, etc. Jewellers would then go on to perform another step of comparing the customer details on Sanction Lists, PEPs, and terrorist lists of governments.

All these KYC and CDD steps take a longer time to complete. This may irk the customers who may just want to do away with jewellery purchasing.

All these steps show that jewellers’ focus remains on complying with the regulatory obligations. The pressure from the senior management and fear of reputation risk also makes them pay attention to compliance.

But, due to this, they compromise the customers’ experience during the onboarding process. The jewellers do not value the customers’ time and efforts in coming to the shop. Such experience may lead to customers turning to other jewellers.

Can automation of KYC, CDD, and risk assessment procedures improve customer experience?

The best possible solution to improve customer experience would be the automation of these processes. You can automate the KYC process during customer onboarding as well as integrate customer relationship management with it. You can use the same data as customer intelligence to market your products to customers.

Automation will include asking customers to fill up the digital forms and submit their verification documents. You can also add other evolving technologies of artificial intelligence and machine learning to enhance the processes, specifically for streamlining the risk assessment and risk management processes.

Automation makes the handling of data easier and reduces human error. Thus, you can maintain customer data speed, accuracy, and reliability. And automation also helps you create a 360-degree view of the customer with verification from different sources.

Such automation improves your customer onboarding process, which builds customers’ trust in you. Thus, it’s not about compromising customer experience for regulatory compliance or vice versa. With automation, you improve your KYC and CDD processes that help you comply as well as improve customer experience.

Conclusion

Both customer experience and regulatory compliance are necessary. If you practice the former, it brings you good business. For the latter, you have no option because it is a legal obligation.

But regulatory obligations cannot be the reason to worsen your customer experiences. Jewellers must find a good balance between regulatory compliance and excellent customer experience. And, since automation is a sure-shot solution for it, adopt it and make your customers and regulators happy.

You start with automation of your customer onboarding processes. This improves customer lifecycle management that guarantees higher customer engagement. Thus, you have a competitive advantage over other jewellers.

Keep in mind that the primary purpose of automating your processes is to improve customer experience with no compromise on achieving compliance with AML and CFT regulations.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

The Dark Connection Between the Dark Web and Money Laundering

Governments are taking strict action against criminals involved in the trade of illegal drugs and identity theft. They are trying to identify and prevent criminal activities on the dark web. Dark web criminal activities have become a pressing issue for governments worldwide, and they take the appropriate measures to prevent these illegal activities and catch the criminals.

Users use the surface web for their online activities and access the web pages indexed by search engines. But there’s another dark part of the web that criminals are rampantly using to launder their dirty money. The dark web refers to websites that users cannot access via regular browsers. The users’ location and internet activities are hidden on the dark web, and authorities cannot scrutinise them. So, when authorities or agencies conduct network analysis or traffic analysis, the users cannot be identified. The content accessed on the dark web is hidden and casual users cannot access it.

Privacy and anonymity are the two factors that make the dark web a popular platform rampantly used to launder money. Other criminal activities are also conducted on a large scale, such as the trade of illegal drugs, goods, extortion, etc., to evade authorities’ attention.

Financial institutions need to adopt strict measures that will help identify, prevent, and report illegal activities and prevent illicit money from entering the legal system. Many organisations fall prey to the dark web and have suffered data breaches in which third-party vendors with their inefficient fraud mechanism have made the criminals’ work easy

Risks of Dark Web

Did you know that cyber-attacks and data breaches are among the most prominent global risks? It’s not surprising to learn this trend as digital technology is omnipresent. Today’s world thrives on the internet, which has become an integral part of our lives.

Let’s discuss what criminals are doing on the Dark Web.

Money Laundering is a common crime conducted on the dark web as it allows the transfer of illicit funds to anonymous accounts.
Phishing is a common cyber-attack that has plagued the modern digital world. It is an easy method for criminals to do frauds using fake websites, emails, and messages which appear legitimate, and ordinary users cannot detect that these are fake. They fool users, grab their credit card details, and pose substantial financial and identity theft risks.
Today, identity theft is a massive cyber problem as criminals impersonate legit users on the web, steal their data, and access their financial accounts.
Malware is software laden with a virus that hacks the mobile phone or PCs to steal sensitive data.
Criminals steal credit card details to make purchases of large amounts and indulge in fraudulent purchases. They also buy the data of stolen credit cards from other cybercriminals who took advantage of the weak cyber systems.

Criminals operating on the dark web are compensated with virtual currencies that make it even easier for criminals to launder money. Virtual currencies are not legalised in most countries. There are many challenges that authorities have to face in identifying the money laundering cases with virtual currencies. It makes it difficult for monitoring agencies to track the users and their online activities.

New UAE Law on Cyber Security

UAE has implemented several laws for cyber security and put in place several legal measures. The new Cyber Crime law addresses the growing concern of cyber security issues in the UAE.

How to Mitigate the Risks from the Dark Web?

It’s essential to know your customers to ensure that your business is associated with a legitimate entity or organisation. Identifying the UBO- Ultimate Beneficial Owner is necessary for any institution. Financial institutions need to understand the type and nature of the business, and the risk posed by the same needs to be examined at all levels.

Whether it’s KYC- Know Your Customer or the CDD – Customer Due Diligence process- financial institutions should diligently follow every step for risk assessment. It will help businesses identify any suspicious transaction, trace the source of the money, and prevent illegally obtained from entering their company.

Companies can adopt this vigilant approach and prevent the misuse of the internet to launder money and fund criminal and terrorist activities. Financial institutions can use AI and ML to avoid criminals with AML software. Modern technologies such as Blockchain can prove to be effective in preventing money laundering and ensuring AML compliance.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

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What are the causes of the failure of AML programs, and how to strengthen the AML Compliance Program?

What are the causes of the failure of AML programs, and how to strengthen the AML Compliance Program?

Despite having stringent AML compliance rules and regulations in place and global AML compliance recommendations, services of AML experts, advanced AML software, and immediate consultation available, non-compliance is a grave concern worldwide. It is estimated that 99.8 % of laundered money goes undetected. So why does black money go undetected and the best AML programs fail? Let’s discuss the causes of the failure of AML programs and how to strengthen the AML compliance program.

Why do AML Compliance Programs fail?

1. Compliance Officer's absence

A Money Laundering Reporting Officer or Anti-money laundering officer is a compliance officer that manages the AML compliance of a firm. The appointment of an MLRO-AML compliance officer is necessary as per the AML laws and regulations. The FATF- Financial Action Task Force has recommended the appointment of an MLRO at the management level.

2. Lack of AML training

Lack of awareness and employees not being equipped with the proper knowledge and tools to identify suspicious transactions is one of the reasons for AML compliance failure. The AML compliance and KYC process are intertwined, and lack of clarity often leads to AML non-compliance. So, AML compliance investigation is treated as a hindrance in day-to-day operations. But it should not be the case as AML compliance is necessary for helping the government fight money laundering and avoid non-compliance and penalties.

It’s essential to provide adequate AML training to the employees to equip them with updated knowledge of AML rules and tools to identify suspicious transactions.

They should be aware of the consequences of non-compliance and get acquainted with the AML policies, rules, and documentation process. They need to adopt the correct behavior to combat the challenges of non-compliance.

Proper training should focus on the importance of AML and compliance, the social and internal consequences of non-compliance, rules, policies & procedures, and money laundering mechanisms. Employees should be trained to create an STR and avoid false positives.

The irony is that criminals hire money launderer professionals. They are well aware of the process of AML detection and are equally vigilant about the ways to circumvent the AML mechanisms. So, to be ahead of the criminals, banks, financial institutions, capital market companies should hire AML experts who can assist them in catching the criminals and identifying suspicious transactions and fraudulent accounts.

3. Confusion about Customer Dat

Many financial institutions are confused about handling the vast customer data and effectively cracking down on criminals. The customer data may be incomplete, not easily accessible, or stored only in physical form. Lack of quick access, incomplete data, and the absence of use of technology is a significant hurdle for financial institutions in AML compliance.

4. Weak KYC process

KYC is an integral part of the AML compliance programs. When institutions do not have a proper KYC process, it provides an opportunity for criminals to launder money easily.

5. Data stored in digital systems that operate in isolation

Disparate digital systems often pose a massive challenge in collecting customer data and detecting suspicious transactions. In such scenarios, quick access cross verification and scalability are non-existent. So, extracting information is difficult, making the AML compliance process unsuccessful.

6. False Positives

False positives are a huge concern for every organisation. The false alerts put undue pressure on the company, waste resources, and question its reliability and reputation. The transaction monitoring systems should be well-equipped to deal with the menace of money laundering. The transaction monitoring software should be equipped with capabilities to provide accurate results.

It’s essential to get assistance in the proper AML software selection. It’s crucial to integrate a software solution that can spare the financial institution of false alarms, save resources and instead provide the correct alerts that will help identify suspicious accounts and transactions.

7. Lack of compliance culture

Lack of acceptance of setting up an in-house AML compliance department and no compliance culture is why AML programs fail. The management is responsible for setting up an AML compliance department, and the unwillingness to do so does not help in AML compliance. Institutions have a lot on their plate and are occupied with running the company dealing with other major and minor issues, so AML compliance takes a backseat.

An untrained workforce in AML compliance does not help either, and a vast amount of black money remains undetected, and the company has to pay up the fines imposed by the authorities. Most of the time, the management turns a blind eye to the suspicious transactions because of high gains and treats AML non-compliance fines as not serious enough to worry about. It is not the right approach. The leadership should inculcate the culture of compliance.

How to prevent the AML program from failing?

1. Hire a good AML consultant

AML compliance is a complex task that needs continuous vigilance and monitoring to avoid the risk of non-compliance. AML consultants have in-depth knowledge of the AML rules and regulations and are aware of the complexities involved in the process. They understand the AML regulations and help companies comply with the AML laws.

The consultants have a strong network of AML professionals and accessibility to AML experts, and their expertise will help mitigate the AML risks. AML training should be provided to the employees and equip them with the proper knowledge and practical tools to identify suspicious transactions.

AML experts help detect suspicious transactions and speed up the identification process to help combat money laundering and prevent associating with fraudulent people and entities. Customized services are provided, and clients from diverse industries can receive robust AML support that is likely to have unique business requirements. The service provider will offer complete support at all stages of the AML compliance cycle and prevent financial crimes.

The AML consultant team consists of compliance experts, a risk management team, and business analysts who offer expertise to meet the diverse AML compliance requirements. Get access to the vast and rich experience of the experts who will leave no stone unturned to help your business stay AML compliant at all times prevent a single instance of non-compliance. Get access to the updated knowledge of AML rules and regulations and ensure compliance with the global AML regulations and recommendations.

AML experts know the governments and regulators’ expectations and are in sync to stay AML compliant. Get AML consultancy services online from the experts and rest your worries about AML compliance. Avoid penalties and guard your reputation by diligently following the AML rules and regulations.

2. AML Software

AML Software embedded with emerging technologies such as AI and ML help track doubtful accounts and trace the source of black money. The software is available at budget-friendly prices and therefore is a compelling reason why financial institutions should adopt the software and fight money laundering with advanced tools.

Get assistance from AML experts to help you select the best software for your business and help reduce the rate of false positives. Automation should become an inherent part of AML compliance as with Robotic Process Automation, the process is streamlined and becomes cost-efficient. Let RPA detect suspicious transactions and the human workforce investigate and take the necessary actions to deal with the money launderers.

Conclusion

Money Laundering is a global financial crime that involves transferring illegally-obtained money into the legal system- banks and financial institutions- and using it to fund criminal and terrorist activities. Criminals use banks, financial institutions, capital markets, and other regulated entities to launder money. Criminals try to run money through these legal institutions and be successful in money laundering.

Regulatory and compliance challenges continue to bother the entities as they struggle to comply with the AML rules and regulations and deal with the rising money laundering cases. The incompetence of the financial institutions in being AML compliant can be known from the fact that more than $15 billion worldwide fines have been imposed for AML violation. Check List of Administrative Fines related to AML non-compliance.

AML violation can result from a lack of knowledge, training, or unwillingness to comply with the AML rules. This attitude and behaviour need to be changed as non-compliance can result in serious consequences.

Regulated entities should follow the AML rules not only because they have to avoid the penalties but should treat AML compliance as a duty in serving the nation. Their AML compliance efforts should be in tandem with the government’s objective to prevent money laundering. It will unburden the world economy of this financial crime’s ill effects and avoid criminal and terrorist activities funding.

AML programs will be successful only if the leadership is willing to go that extra mile to prevent financial crimes and eliminate the menace of money laundering.

It is crucial to remove the complications which drain the company’s resources when the authorities impose hefty fines and penalties. Incomplete data, reliance on physical storage systems, lack of acceptance or limited use, or isolated digital systems pose a huge problem for companies in being AML compliant.

Proper KYC processes, identification of UBOs and PEP, and other crucial information are necessary to follow the AML rules and regulations diligently. Companies need to get rid of partial vigilance and create a robust AML compliance program is the need of the hour. It would be best to hire AML compliance experts who would assist the business at every stage of the AML compliance process.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

Top 15 Anti-Money Laundering (AML) Podcasts

Top 15 Anti-Money Laundering Podcasts

Podcasts are a great way of obtaining knowledge and getting updated on the latest information on your chosen subject at your convenience. AML professionals can use the AML podcasts to stay updated on the amendments in the AML rules and regulations. From basic concepts in the AML domain to complex terms and challenges in AML, get access to valuable information via AML podcasts. Let’s discuss the top AML podcasts that will prove helpful for AML professionals or any person who wants to get acquainted with the AML procedures.

1. AML Talk Show

The podcast will let you know the effectiveness of the global efforts to fight money laundering and prevent terrorist financing. The hosts’ Martin woods and Stephen Platt interview professionals working in the field of financial crime prevention.

2. Captivated Audience

This podcast is a result of the pandemic that impacted crime prevention professionals while working from home. The hosts talk to people across the globe and understand how they have adapted to the work from home scenario dealing with the challenges of detecting and preventing financial crimes.

3. Dark Money Files

This podcast is presented by Graham Barrow and Ray Blake – professionals working to prevent financial crime and have helped organisations and institutions deal with the criminals abusing the financial system to fulfil their illegal requirements. It explains the layman about money laundering, its various forms, and implications.

4. Great Women in Compliance

As the name suggests, this podcast celebrates the achievements of women who have contributed to the AML compliance field and have broken down barriers to emerge as winners and as differentiators working relentlessly in the compliance field. Hear the interactive conversations of hosts Mary Shirley and Lisa Fine with several inspirational women.

5. Sanction Space

Sanction is a crucial aspect of AML compliance procedures. Get to know about sanctions – the prevalent trends and anecdotes and their implication on the presents sanctions scenario. Hear out Dr. Justine Walker, the head of the Global Sanctions and Risk at ACAMS and expert in implementing the global sanctions.

6. Suspicious Transaction Reports

People looking forward to getting in-depth knowledge of the STRs- Suspicious Transaction Reports, an essential element in the AML compliance process, can listen to this podcast. It is hosted by the Centre for Financial Crime and Security Studies at RUSI. There are two parts to the episode- the first part provides a summarised version of the latest financial crime news, and the second part offers an in-depth insight into new financial crime research.

7. Bribe, Swindle, or Steal

The podcast with an interesting name is hosted by the president of Trace International, a non-profit that offers anti-bribery compliance support. The conversation steers towards white-collar crimes and preventative measures. Enrich your knowledge with experts in the field of prevention of financial crime, which includes money laundering, sanctions, and financial fraud.

8. AML Conversations

If you are interested in the vast field of AML compliance or you want to update your knowledge as an AML professional, you can tune in to this podcast. Get to know what is happening in the public and private sector and globally about the AML issue. John J. Bryne introduces industry experts in this podcast and connects with AML professionals.

9. Coffee & Regs

This podcast features regulatory experts, industry partners, former compliance officers, and RegTech collaborators. The conversations produce valuable inputs on improving the operations and technology to get better results. The discussion proves helpful for financial firms to deal with the menace of money laundering and the complexities involved in existing global regulations and ways to strengthen them to combat financial crimes.

10. FinCrime Spotlight

The podcast throws light on the Fintech community and the measures taken to fight financial crimes. Hear from the best fintech companies and their personal and professional opinion on financial crime and their thoughts of how the problem would be in the future.

11. Rebank - Banking in the Future

If innovation excites you and you are interested in the financial industry, this podcast will interest you greatly. Learn how innovation, technological advancement, and social changes impact the financial services industry. Educate yourself on the top trends of the financial and banking sector. The podcast discusses the sector’s challenges and developments to combat them.

12. Suspicious Activity

Inside the FinCEN Files: FinCEN investigation has been a hot topic of the debate that has revealed how banks and regulatory authorities turned a blind eye to money laundering. The leaked documents revealed how more than $2 Tn transactions were made to launder illicit money globally. Get an in-depth insight into the leak and learn how the international banking system, whose operations were always top-secret, had a massive impact on the world economy.

13. Corruption Crime And Compliance

If you need an expert opinion in compliance, internal investigations, and enforcement, you need to hear Michael Volkov- a former federal prosecutor and a white-collar defense attorney. Listen to the veteran in the podcast, which focuses on the current events happening in financial crime.

14. C Notes

Ever wondered how AML professionals work and combat the challenges posed by money laundering. Learn about the contribution of these AML professionals and how they work towards achieving AML compliance.

15. Financial Crime Matters

If financial crime matters to you, you need to tune into this podcast hosted by Kieran Beer, Chief Analyst. Learn about the latest financial crimes and trending topics. Update your knowledge with interviews with leading professionals in the field of anti-financial crime.

The Bottom-line:

Get expert views on AML compliance and the challenges and measures to prevent this global financial crime of money laundering and terrorist financing. Podcasts enable you to learn new things and stay updated. Tune into the AML podcasts and enhance your knowledge about the fast-evolving AML compliance field.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE

Top 5 methods Criminals use to Launder money

Money Laundering has become a massive problem for governments as the issue is escalating day by day. It hits the world economy badly as the vast amount of money is used to fund illegal activities and fund terrorism. As per a recent UN report, approximately $ 800 billion – USD 2 trillion is laundered every year, accounting for 2-5% of global GDP. Anti-money laundering laws, rules, and regulations are implemented to detect suspicious accounts and transactions and trace the source of the illegal money. Let’s discuss the top 5 methods criminals use to launder money and evade government scrutiny.

1. Instant Messaging

Who would have thought the instant messaging platform would become a popular choice for criminals to launder their dirty money? Criminals use instant messaging apps, which are more than messaging apps, and offer services that make payment facilities available.

Online transfers have reduced cash transactions to a great extent. With the vast amount of transactions being made on messaging platforms, tracking might be a problem, so businesses need to be vigilant and track down suspicious transactions and fake accounts. Companies will require resources and a team to identify such doubtful transactions.

AML training can help companies stay ahead of the criminals and know if the messaging platforms are misused. Training will equip them with updated knowledge of the technology being used and adopt a proactive approach to detect any suspicious transaction immediately.

2. Online Games

The online gaming industry today is growing by leaps and bounds. Criminals have found the gaming platforms to be a potential opportunity to launder money. The games use virtual currencies which users can trade for real cash.

There are no specific regulations for online trading in the gaming industry, so criminals set up numerous accounts in different jurisdictions to transfer money. They purchase in-game credits and transfer them to launder money. They also create fake accounts or hack existing accounts to steal other players’ credits, and all these attempts are made to increase the virtual currencies, which they can later trade for cash.

3. Gift Cards

Gift cards enjoy immense popularity. After the card is activated, criminals quickly transfer the funds available or use them to buy products sold for cash. Stolen debit or credit cards are rampantly used to purchase prepaid cards, and then they are further sold for money.

The method adopted by the criminals is to copy the serial numbers of the cards, scratch the security code and later cover them up. So, it’s essential to catch the criminals when the cards are stolen as these can be used to launder money. A method adopted to prevent prepaid cards for money laundering is that retailers limit the number of prepaid cards anyone can buy in a day.

4. Cryptocurrency

Cryptocurrency is one of the most popular virtual currencies, and criminals are using this newest kid on the block to launder money. This digital currency is protected by encryption which prevents double-spending. But this currency is not issued by the central government and not regulated by the government, so they become a favourite method of the money launderers. Moreover, it is also banned in some countries.

For instance, the Chinese government has stated that all transactions in cryptocurrency are invalid. Though cryptocurrency may not pose a massive threat to a particular country’s currency, its increased use and entry into the mainstream medium of value exchange is undoubtedly something to worry about.

Today, the digital world is expanding, and many large-scale companies accept this modern currency for providing their products and services. So, it allows criminals to make transactions and indulge in financial terrorism. A recent study has revealed that approximately 56 % of worldwide crypto exchanges do not have a robust KYC process. People use this loophole and use digital currency to launder money.

5. Shell Companies

Criminals often use shell companies or front companies to launder money to hide the identity of the true beneficiary of the proceeds or the profit of the illegal activities. The modus operandi is to sell goods at discounted prices and show false profits. The legal and illicit money is mixed to make them appear legal and avoid scrutiny. This money is used to fund illegal activities.

Conclusion

Governments rely on the newest technology and software solutions, such as the AML software dedicated to identifying and detecting money-laundering activities with advancements in technology. Technologies such as Blockchain are being considered to combat money laundering offences successfully. On the flip side, criminals, too, are using technology to their advantage and using innovative ways to launder money.

Criminals will do whatever it takes to make their fraudulent activities successful. A proactive approach is required to help the business stay ahead of the criminals as a business owner. It is crucial to have a robust AML compliance program exposure to technology and the right team to help identify the criminals.

It’s better to be prepared and choose a reliable AML service provider that will bring value to the table with its array of services. Right from AML/ CFT policy, controls and Procedure documentation to the creation of Risk assessment report and AML health check-up to the

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

FAQs on Methods Of Money Laundering

The various methods used to launder money include:

Using smurfs, mules, or shells
Gambling
Investing in real estate and then selling it
Investing in jewellery and moving it to other jurisdictions
Online auctions and sales
Virtual currencies
Anonymous online payment services
Fake identities
Counterfeiting

The most common method of money laundering is using smurfs, shells, or mules.

Smurfing means dividing large sums of money into smaller transactions.
Mules are individuals smuggling money.
Money launderers create shell companies to hide illegal transactions and evade taxes.

Businesses primarily used for money laundering are:

Financial institutions
Real estate agents
Dealers in precious metals and gems
Trust and company service providers
Lawyers, notaries, and other legal professionals
Accountants and auditors

Most money laundering activities happen because of the illegal activities of terrorism, drug and sex trafficking, smuggling, gambling, cybercrime, and many others.

Article UAE

Funds Freeze Report (FFR) and Partial Name Match Report (PNMR) filing with goAML

As per UAE AML Laws, reporting entities are required to file two new reports viz., Funds Freeze Report (FFR) and Partial Name Match Report (PNMR).

As stipulated in the Cabinet Decision (74) of 2020, “Regarding Terrorism Lists Regulation and Implementation of UN Security Council Resolutions on the Suppression and Combating of Terrorism, Terrorist Financing, Countering the Proliferation of Weapons of Mass Destruction and its Financing and Relevant Resolutions,” and as a part of the obligation for Targeted Financial Sanctions (TFS) reporting, reporting entities in UAE are supposed two submit two new reports in the goAML portal.

Submission of Funds Freeze Report (FFR) and Partial Name Match Report (PNMR) with goAML

1- Funds Freeze Report (FFR)

Reporting entities are supposed to file Funds Freeze Report to report any freezing measure, prohibition to provide funds or services, and any attempted transactions related to ‘confirmed matches.’

2- Partial Name Match Report (PNMR)

Reporting entities are supposed to submit Partial Name Match Report (PNMR) for any ‘potential match.’

Further, the goAML Registration portal now allows using the following Reasons for Reporting (RFRs):

TFS/PFS – Domestic List
TFS/PFS – UNSCRs

The Reporting entities are required to use the correct and most applicable Reasons for Reporting (RFRs) when submitting the TFS/PFS: Domestic List and TFS/PFS – UNSCRs via goAML.

Reporting Entities should consult the published guidelines issued by their supervisory authorities and the Executive Office – IEC published guidelines, respectively, as updated from time to time in this regard.

A link to the Executive Office – IEC’s website is found herein: https://www.uaeiec.gov.ae/en-us/un-page

It is important that DNFBPS also follow the guidelines provided in Circular No. 1 of 2022: Implementation of Targeted Financial Sanctions on UNSCRs 1718 (2006) and 2231 (2015).

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.

Reach Out to Pathik

Article UAE