What is Money Laundering?
Money laundering is the process of disguising the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.
How Money Laundering Occurs?
- Placement
- Initial Entry: Introducing illicit funds into the financial system through deposits, purchases, or other means.
- Layering
- Complex Transactions: Moving funds through a series of complex transactions to obscure their origin.
- Integration
- Final Stage: Reintegrating the laundered money into the economy as legitimate funds.
- Shell Companies
- Fake Entities: Using shell companies to mask the true ownership and origin of funds.
- Trade-Based Laundering
- Over/Under Invoicing: Manipulating trade transactions to move money across borders.
What are the Impacts of Money Laundering on Businesses?
- Financial Penalties
- Regulatory Fines: Significant fines for non-compliance with anti-money laundering (AML) regulations.
- Legal Consequences
- Criminal Charges: Potential criminal charges against individuals or the business.
- Reputation damage
- Public Trust: Damage to public trust and business reputation due to association with illegal activities.
- Increased Compliance Costs
- AML Programs: Higher costs to implement and maintain comprehensive AML programs.
- Operational disruption
- Business Impact: Disruptions in operations due to investigations and compliance activities.
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