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Compliance: the only solution to prevent money laundering

by Communication Team | Mar 02, 2017

Transparency_leavesTalks about cash and its supposed links to criminality have practically become a daily topic of discussion particularly with India’s recent demonetisation of its higher denomination notes and the EU’s decision to cease production of the €500 by 2018. Nevertheless, none of these examples dug deeper into the issue of how money laundering occurs. Cash, like any other payment method, is a tool. And not all its attributes make it attractive to criminals, such as its bulkiness and conspicuousness. Cash might have traditionally been criminals’ preferred tool before the establishment of other payment instruments, but today money laundering techniques have evolved beyond cash and have become extremely sophisticated. To respond to that, governments and the financial system should respond with an even more sophisticated solution instead of focusing on cash as the cause of all evils.

Why haven’t governments thought to dig deeper into the issue and ask themselves: how do billions of dollars of illicit funds – estimated at 2-5% of global GDP according to the UNODC – enter the financial system each year so easily? Those billions probably didn’t fit into a briefcase but they certainly did appear in someone’s bank account.

In his article “Cleaning up compliance to tackle money laundering” Travelex’s Head of Corporate Compliance, Steve King, calls the Foreign Exchange (FX) industry to improve its compliance strategy. He mentions the economic importance of cash in many of the world’s markets. And although “there are particular challenges that arise from wholesale banking, compared to retail, particularly when buying back from high risk jurisdictions” the only way to limit the risk of funnelling illicit funds is for the wholesale cash provider and the financial institution be able “to rely implicitly on the process and controls of their partner”. King reminds the banking system that cash and compliance requirements aren’t going to disappear any time soon and it is therefore the industry’s responsibility, in conjunction with regulators and law enforcement authorities, to be as diligent and as innovative as possible. All “parties need to know as much about their partner’s business as their own, including details of all clients to they can be monitored for trends that are indicative of money laundering […] Every part of the industry needs to take responsibility for their role in maintaining cash compliance”.

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