Written by Alex Ktorides
Gordon Dadds, the legal and professional services firm, is urging businesses to get smarter in how they handle money laundering or face the wrath of HMRC with some hefty financial fines. It warns that the digitalisation of cash has led to increased risks to businesses from money laundering. Whilst the majority of businesses are good at acknowledging these risks, they need to do more to mitigate the risk of money laundering.
Money laundering is a serious crime which is undermining the financial well-being of many businesses and the wider economy. Vast amounts of money is laundered through banks and other regulated businesses, and this includes money from international criminal activity and corruption.
Whilst regulatory enforcement, both in the UK and Europe, is widely aligned, outside of Europe regulation is not joined-up leaving countries like the UK open to criminal activity, warns Gordon Dadds.
Alex Ktorides, Partner at Gordon Dadds, says:
“Digitalisation has made it far easier for organised crime syndicates to withhold money from the financial system and to transfer assets from what appear to be legitimate businesses and individuals to criminals.
“Whilst regulation can be seen as a burden and businesses would naturally prefer less red tape, it provides crucial protection. However, they should be mindful that by breaching these laws businesses can be ruined through significant financial penalties; one large fine could be enough to put a firm out of business. Inevitably many executives have a tendency to do the bare minimum and see AML as a box ticking exercise. But due diligence should be taken seriously and businesses should be going above and beyond the necessary requirements.”
Alex Ktorides continues:
“The revolution in payments, transferring of money for holidays, business to business transfers or for sending money abroad has increased due to people wanting cheaper and faster payments. However, technology is always one step ahead of regulation, therefore businesses need to get smarter in how they treat this technology.
“It is not enough to want to do the right thing, or have weak processes or under trained staff as these leave businesses vulnerable and exposed to criminal activity. We cannot urge business owners enough to take action now, before it’s too late. Once you engage you find there is much you can easily and painlessly do to make a big difference to your AML compliance. Ironically, our view is that the blockchain and distributed ledger technology (if not the currencies in the short term) will provide much improved access to ‘know your client’ (KYC) information so there is nothing to be shy of provided you have access to expertise.”
Businesses should not shy away from asking customers questions as to the source of their funding as part of the AML process. They need to take a risk based approach and consider the characteristics of the customer, the product and its distribution, the jurisdictions involved in determining the lengths that they have to now go to in terms of conducting due diligence on their clients.
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After reading law, politics and philosophy at the University of Hertfordshire, I qualified as a solicitor in 1997. In 2007, I went in house, specialising in risk, financial crime and regulation. I joined Gordon Dadds in 2012, before which I was senior counsel at BDO LLP. Recognised in the Legal 500, I advise and support clients on regulatory issues in sectors including accountancy, legal, property and gaming and on FCA authorisations. I help with anti-money laundering, sanctions, bribery and corruption, defence to investigations/responding to unauthorised visits and criminal/ civil aspects arising, as well taking the lead for Gordon Dadds' own ethics and risk management functions across Gordon Dadds Group plc. I am the MLRO, Head of Legal Practice and report to the board. Click here for more information. I have recently:
- Acted as a 166 “skilled person” on appointment of the Gibraltar Financial Services Commission, dealing with a safeguarding issue and money laundering review
- Helped a money transfer business with the FCA’s concerns over its activities and authorisations
- Acted for a start-up tech company to obtain FCA authorisation
- Worked with a property related business to obtain FCA authorisation as an AIFM
- Advised a business on whether its activities fell under the definition of a collective investment scheme