Money laundering is an illegal operation that involves disguising large sums of money, which have been accrued through criminal activity such as drug trafficking, so it appears the money has come from a legal source.
Funding for terrorist organisations is a growing source of money laundering. In the process, the money is ‘laundered’, so it appears to be clean and legitimate. It’s a serious crime and is utilised by con artists of all social demographics.
There are three main stages in the money laundering process:
- Placement – when the illegal monies are fed into the legal financial system.
- Layering – when the funds are moved around to mask their origin and distance them from it.
- Integration – when the money is reintroduced into the financial system appearing to be legitimate.
Anyone who works in the financial sector will have had training in spotting money laundering, and there is extensive legislation in place to clamp down on it. As bookkeepers, we are a regulated profession under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. We have to be monitored by a supervisory authority appointed by HM Treasury, such as the Institute of Certified Bookkeepers, and we have in place stringent controls designed to identify, prevent and report money laundering offences. These controls are known as anti-money laundering or AML, and comprise:
- Risk assessment of both clients’ businesses and our own
- Internal controls
- Regular training
- Specified reporting procedures
- Client due diligence and ongoing monitoring
There are a large number of red flags which can raise a bookkeeper’s suspicions that a client may be involved in money laundering. These include:
- Being hired by a client who is based a long way from the bookkeeper.
- A client investing in gold or precious metals which can be easily transferred to other (less strict) countries.
- The operation of a ‘shell’ company – an inactive company which seems to be used as a front for obscure financial dealings or is regularly dormant.
- An apparent lack of sales records – under the Companies Act 2006, directors are legally obliged to keep records which show not only money paid out and received, but also the provenance of that money.
- A lack of obvious assets at a business – for example, a marquee hire company where the assets don’t appear to include any marquees.
- A disparity in goods inwards and reported sales of a finished product, which could indicate the company is a front for a criminal activity.
- A client changing bookkeepers frequently for no genuine reason.
- The client who is reticent about other directors or partners and reluctant to provide information about the structure of the business when requested.
- Business transactions being carried out with organisations in countries where money laundering is known to be prevalent.
- A surprising amount of private funding for the business, or a third-party funder who has no apparent connection with it.
Bookkeepers must keep a detailed record of all client due diligence which is carried out, and any suspicious activity must be reported to the supervisory body immediately.
At AMR Bookkeeping Solutions we’re very experienced at ensuring our clients are engaged in purely legitimate activities. We work with businesses ranging from large companies to sole traders and enjoy contributing to their success. If you think a reputable bookkeeper could make a difference to your business, why not call our friendly and knowledgeable team for a chat? Contact us on 01892 559480 or check out our website.
