To launder funds and legitimise their activities, criminals may rely on the services of finance and legal professionals. We will look at how money laundering issues may be relevant to small businesses.
What is money laundering?
Money laundering is the process by which criminal proceeds (which could be cash or other property, such as a house or car) are transformed to disguise their illicit origins.
There are three stages involved in money laundering:
Placement is the movement of ‘dirty’ money from its source and then placing it into circulation through various businesses – for example financial institutions, casinos, shops etc.
The layering stage (or structuring as it is sometimes referred to) is the most complex. The purpose is to separate the illicit money from its source by using sophisticated layering of transactions. This involves moving cash placed in a financial institution electronically from one country to another into various investments and transformed in a way to hide any audit trail.
This is the final stage. Though the placement and layering stages, the money has been fully integrated into the financial system and mixed with funds of legimate origin. Money is then returned to the launderer from what appears to be ‘clean’ sources.
How does money laundering affect me?
All accountancy service providers have a legal responsibility to report any knowledge or suspicion of money laundering. They must have policies and procedures in place to ensure that they comply with the relevant legislation.
Therefore, if you employ the services of an accountant they will take certain measures to ensure that they can fully trace all of your financial activities.
Will my accountant check my details?
An accountant must take the appropriate steps to ensure that you and your business are really who you say you are.
Initially they will carry out identity checks to confirm your:
date of birth.
This also applies to all individuals who own 25% or more of a company.