Fortifying Financial Institutions Against ML/TF: Identifying and Mitigating Money Laundering and Terrorism Financing Risks
Financial institutions are exposed to significant money laundering and terrorism financing (ML/TF). They are required to understand the risks and take appropriate measures to mitigate those risks.
Financial institutions can be exposed to money laundering in various ways including:
Structuring and Smurfing: For financial institutions that accept cash, criminals may use multiple individuals, called "smurfs," to deposit small amounts of money into accounts in order to avoid detection by financial institutions' AML systems.
Shell companies: Customers may request to open accounts in the name of shell companies to move and conceal the proceeds of illegal activities by creating complex ownership structures that make it difficult, in some cases impossible to identify the beneficial owner.
Trade-based money laundering: Criminals may use false invoicing and other techniques to move money across borders between banks to conceal the origin of funds.
Tax evasion: Customers may request account opening and transfer funds with the purpose to avoid paying taxes.
Financial institutions are also contracting with multiple customers and third-party providers that may expose them to significant ML/TF risks.
