Anti-money laundering controls have been around for a long time, but the latest round of regulations are proving particularly challenging for many businesses. An anti-money laundering compliance course is essential if you want to stay compliant with these new rules. We’ve put together everything you need to know about anti money laundering compliance — from the core principles of money laundering and how it works, to the latest regulations, and what you can do to stay compliant.
1. What is money laundering?
Money laundering, also known as ‘’financial laundering,’’ is the process by which criminals disguise the proceeds of their crime (the ‘’dirty money’’) to make it look like it comes from a legitimate source, like a business. Money launderers will use a range of methods, like loans disguised as business loans, or using companies or overseas nationals to open bank accounts to trade the dirty money.
If you incorporate and hold rental properties, or even if you don’t and you only do real estate transactions in cash, you’re probably thinking a lot about how your cash gets to your rental properties. Does your property manager use services that have pass-through structures so that the hot money gets to your rental properties? What processes are in place so that your tenants never have to track the money? The compliance and anti-money-laundering divisions of the IRS have a lot of questions to answer about this, and they’re waiting to see how the litigation timeline plays out.
To stay compliant with these new rules, it’s essential for real estate operators to understand a few key rules, and a few of the more recent regulations included in the supplemental regulations. (Read “Supplemental Regulations and Related Provisions 2017–18”) The following is meant to cover the most common issues on an ongoing basis for small, medium, and large businesses. Use this guide as a checklist to follow. Separating Property Identical to a Clean Dollars from ‘Dirty’ Dollars: What Can Increase the Risk?
The IRS wants to ensure that real estate investors, commercial lenders, or property owners are not passing along property characteristics that could raise the risk of anti-money-laundering or other money-related crimes. Enter the ‘do not duplicate’ rule. Computations are now required to be done at a ‘separate computer’ from any other computer-generated data, or ‘cleaned computer data.’ This includes serial numbers of generators used for generating rent collections, numbers on lease contracts, and more.
2. How does money laundering work?
Money laundering is the process of creating the appearance that large amounts of money obtained from criminal activity, such as drug trafficking or terrorism, originated from a legitimate source. The money launderer will then try to integrate the “clean” money into the financial system through wire transfers, credit cards, or other means.
Transactions involving certain entities, such as financial service providers or brokerages, and certain customers, like businesses or charities, are outside the scope of traditional money laundering investigations. In such cases, the Financial Intelligence Unit (FINU), administered jointly by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), looks into suspicious transactions, US persons, and suspicious clearing house transactions to establish the facts of the case.
The activities that create the appearance of illegal activity can take a variety of forms, including but not limited to:
Examples of transactions that might not appear as suspicious are:
If a transaction appears suspicious, businesses or charities can be flagged as high risk and clients and individuals can be identified as certain types of high-risk or suspicious entities.
Often referred to as ‘know your client’ laws, these FATCA regulations were passed in 2010 as part of the USA Patriot Act to help prevent US businesses and certain US people from bankrolling terrorism. FATCA regulations require that businesses “know” certain information about their clients, including:
A business usually only needs to know who their clients are and that information is kept in a brokerages account. There is a security risk if the information is not kept securely and/or if the business fails to mitigate against any attempt by a terrorist or fraudster to access the information. To comply with FATCA requirements tranche 2 AML reform, businesses usually apply for the account of a client through the Client Referral Reporting process. The client’s information is then transmitted via a Secure Sockets Layer (SSL) connection to the appropriate FinCEN financial intelligence unit for analysis.
FATCA requirements also apply to financial service providers, or FIs.
3. Why do businesses care about money laundering?
If you’re a small business owner, you may not think the money laundering laws apply to you. You might think that because you don’t have a lot of cash or that you don’t handle cash on a regular basis that you’re not at risk for money laundering. Both of these things are true. In fact, money laundering is particularly challenging for businesses that don’t traditionally do a lot of cash work. There are specific requirements that businesses must meet if they want to stay compliant with anti-money laundering requirements.
There are five main areas businesses must keep in mind in order to stay compliant. These are:
Civil, criminal, and administrative sanctions
Businesses can find themselves subject to certain financial sanctions, including sanctions imposed by the US or European Union for activity related to sanctions against Iran, North Korea, or transnational organized crime. There are a number of different types of sanctions we’re likely to see in the US, including current sanctions relating to North Korea, Iran’s activities in Syria, the Gorbachev and Brezhnev regime reversal and humanitarian sanctions.
Businesses will also likely be subject to sanctions imposed by some country, or regions, that are part of the same group as the sanctions the US is or is considering applying.
Making sure your business is compliant with sanctions is delicate business. Sanctions can impact your ability to access international capital markets, meaning you won’t be able to borrow money or access other forms of credit. That might impact your ability to issue shares or bonds, and whether you get loans from commercial banks or governments. Not to mention interest costs and transaction costs you’ll incur because your business isn’t compliant with sanctions.
We recommend analyzing the collateral you use to obtain any funding. You might want to ask your accountant whether you need to get non-US government, government-sponsored, or corporate loans or investing opportunities (for example, US government-sponsored enterprise loans or CPFI loans).
Still looking for answers….
Hence, why aml online course is just the knowledge you need to tap into.
Here’s what you can expect to achieve:
- What are the different types of companies that are used by people for money laundering?
- Money laundering and terrorist financing are they the same thing?
- Understand the risks it can pose on organisations
- Commonly used terms and concepts to better your knowledge
and much more…
Are you ready to learn about AML?