Preventing money laundering helps companies avoid involvement in unethicaland potentially criminal conduct.
Why money laundering is serious
Prevention means preparing in advance to reduce a risk.
Money laundering disguises proceeds of crime as legitimate funds. The underlying offenses can include drug trafficking, human trafficking, corruption, and kidnapping.
Illicit funds can distort markets and create unfair competition for smaller businesses. Laundering can also help finance serious harms, although each case and its effects differ.
Ethical organizations oppose illicit conduct
Organizations can build trust by addressing the risks linked to corruption and laundering. Prevention will not eliminate every offense, but effective controls can reduce exposure.
Preparation and willingness to act are essential. Companies should cooperate, as appropriate, with organizations and public bodies responsible for financial integrity, and consider guidance from bodies such as the FATF and relevant domestic authorities.
Measures for preventing the offense
Laundering can cross borders and involve complex transactions. A lack of immediate consequences does not mean that a company has no exposure.
Useful preventive measures include:
- Apply robust requirements: Use controls that reflect local law, the organization's risk profile, and relevant international guidance.
- Know your customers: Customer due diligence helps establish who a customer is, where funds may come from, and the nature of the business relationship, using suitable evidence.
- Create an alert system: Identify and escalate suspicious activity, and report it to the competent authority when the law requires it. In Mexico, that may involve the Financial Intelligence Unit and other designated channels.
- Set clear policies : Explain the company's controls, responsibilities, and reporting procedures so employees know what to do.
What practices can help prevent laundering?
The original article draws on guidance from Colombia's financial intelligence authority. The following examples are illustrative; legal duties differ by country.
Refunds for sold goods
Define when and how a refund is issued, verify its recipient, and keep a record so refunds are not used to disguise funds.
Foreign-currency handling
Document how foreign-currency transactions are authorized, converted, transported, and recorded under applicable law.
Assignment of receivables
Check counterparties and use appropriately regulated financial intermediaries when financing receivables or seeking loans.
Issuing securities and managing financial instruments
Understand the rules that apply to securities, bonds, and registration so these instruments are not used to conceal illicit funds.
Investments and purchasing
Assess the sources of funds and assets offered by prospective investors and intermediaries, including beneficial ownership and supporting documents where required.
Certificates and references
Set criteria for issuing certificates and references so third parties cannot use them to create a false appearance of legitimacy.
No organization is immune to money-laundering exposure. EthicsGlobal offers training, advisory support, and technology for identifying and reporting concerns; seek qualified legal guidance for specific obligations.
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