In hiring an executive, creating an alliance, acquiring another company, or perhaps employing a vendor, it is important to conduct a thorough risk analysis to determine the potential risks your business has to face. It allows you to make a well-informed decision on whether the potential benefits outweigh the risks. While some offers appear not risky, only a few can be. There is a risk; however, it’s not significant. Yet, even if many employees, vendors, and partners are legitimate and have a low risk it doesn’t mean that there aren’t individuals who participate in illegal activities to earn additional money.
The most popular methods these businesses earn their cash is through illicit methods including bribery and fraud, drug sales, sale of weapons, or even human trafficking. The majority of those as well as the companies that are involved in this keep a portion of their earnings hidden in what seems as a legitimate enterprise. They make use of diverse money laundering strategies to ensure that the money obtained through illegal activities appears to be coming from legitimate sources.
How do you determine whether anyone you’re thinking of putting forward to fill an executive role or an organization you’d like to purchase has taken part in cash laundering fraud? It is best to perform a risk analysis, which includes thorough Executive Due Diligence. The methods used by Infortal for due diligence are more extensive than simple searches of public records. We also conduct a thorough analysis of intelligence records from open sources and other information from various nations and states, as well as many more. Armed with this data you’ll be able to determine the risk and determine if it’s a good idea to take the next step.
We’ll take a closer look at what the concept of the term “money laundering” means, what risk assessment can do to keep you safe from its harmful negative consequences, and what Infortal can do to help you.
What is Money Laundering?
The above definition of”money laundering” provides a solid concept of what it is however, it’s not a complete description. The concept behind it’s pretty simple that is, money derived from criminal actions is disguised as legitimate money earned legally. However, in reality, the operations of money laundering are typically more intricate. The money can be accessed by multiple shell corporations and firms. The internet banking industry and third-party transfer services like PayPal have made it easier to get money out of the system like the current rise of cryptocurrency.
It’s also more simple to transfer money between different countries and to other currencies. It makes transferring money out of nations in which corruption and other crimes occur fairly easy. Companies, individuals, and even whole nations that have been sanctioned can’t conduct business in America. The U.S. now has even greater options for securing the flow of money due to the ease at which money can be transferred and transformed.
The majority of money laundering activities operate in three different ways. The first is that the cash derived through criminal activity referred to as “dirty money,” is discreetly and cautiously injected into legitimate businesses. In the second, money is transported through different companies and private individuals by money transactions and carefully recorded manipulation. It is a “laundering” process in which the dirty money is disguised to appear as clean, just like clothes become clean when washed. In the end, the money is stored in a legitimate bank account, where criminals are allowed to access it in any way they like without fear of getting caught.
In some cases, this involves companies, however, at other times, it is about buying and selling real estate through casinos, transferring funds through bank accounts, and much more. The simplest laundering methods may employ one option while sophisticated money laundering typically has multiple layers. Criminals might place their funds in real estate and then dispose of these properties, and later change the funds into a different currency, before transferring it to casinos. This kind of layering can make it harder to trace the source of illegal cash.
How Risk Assessment Protects Against Money Laundering
If we talk about ways to prevent money laundering usually, we’re discussing due diligence and risk assessment. Some companies don’t have the resources to conduct due diligence. They conduct a simple background check of the executives or check a company against a global watchlist instead of taking an exhaustive investigation of their past and activities. The information they provide is only a small portion of what the company is involved in or what the CEO was engaged in. Most of the time, these simple and inexpensive searches just reveal how the state has performed within the last 7 years. They do not look into different names the president or the company used to look at the business relationships they’ve signed or investigate where their financing originates from.
Here are some of the methods that risk assessment highlight problems with money laundering or reveal corrupt practices that are hidden.
We Examine Aliases DBAs and Shell Companies as well as Subsidiaries
Executives may have employed names when dealing in illegitimate companies, and businesses may employ the term DBA (Doing Business As) a shell corporation, or a subsidiary to transfer illicit funds through different companies. Infortal can dig up every other name, subsidiary, or company the business or executive employed to discover information on the activities they’ve conducted under the same name. Shell businesses are commonly employed to transfer money between states, or from country to country as well as aliases may be employed to hide corruption or conflicts of interest. Be aware of every other name that someone else is employing so that you can examine their legitimacy.
We Consider Established Relationships
The process of laundering money can be accomplished through the concealing of relationships between people or businesses. Money derived illegally from an infamous mobster may be transferred to a business that is owned by a relative who is a different person. Both could be extremely cautious about not being spotted as a couple or linked to each other in any way. In the absence of a thorough investigation into someone’s connection to their family or friends, the link might not be noticed.
Our Attention is Focused on Companies Operating Offshore
Due to their location in different nations, offshore businesses tend to be used for concealing funds and laundering. For this reason “offshore” simply means the business is in a different country, and it is subject to the laws of that nation instead of U.S. law. There are many offshore banks in the Bahamas, Switzerland, and different locations, like. The well-known Swiss account, for instance, didn’t originally come with names. This allowed it to be very easy to conceal money within the nation.
Apart from offshore bank accounts, a few criminals also invest their money into overseas companies or in other nations to aid terrorists. As an example, the country of Nauru was the most lucrative money laundering destination in the 1980s. Russian criminals took advantage of Nauru’s strict privacy laws to transfer funds to terrorist group al-Qaida.
What is The Location of The Headquarters?
It’s often difficult to figure out where a company’s base of operations is, particularly when they operate multiple subsidiaries as well as shell companies. It’s possible to believe that you’re dealing with a U.S. company only to discover that the business is part of a different business that’s controlled by a major firm based in China. Conducting a basic due diligence check may not be enough to uncover this. That’s why it is important to conduct an in-depth search. Be wary of information that you can find on sources like companies’ websites or other sources on the internet. Certain companies don’t have websites. Therefore, researching these companies isn’t simple.
These Resources Are Only an Initial Step
Although resources like Transparency International do give information regarding firms that have been associated with corruption, they do not offer thorough due diligence. Sure, it’s true certain countries are listed as being high-risk for corruption however, how can you be sure that the company you’re interested in cooperating with does not have a business in the country? It’s not possible without conducting the necessary due diligence. Resources that are free or even cheap paid sources typically do not provide enough details to allow you to make an informed choice.
The Risks of Working With an Organization That Launders Money
Partnering with a company operating illegally such as corruption, money laundering trafficking, bribery, or any else, comes with an extreme risk. When it comes to the issue of money laundering, there’s a chance that the company you work with may funnel money that is dirty through you. It could result in you becoming an accomplice, particularly if you failed to do due diligence. If you form or merge any partnership type that involves the co-mingling of funds or the signing of agreements, you could discover that you’re smuggling money and acquiescing to the whole matter.
Although you’re not merging with another company, hiring an executive with any financial position can result in the same result. The executive could approve a deal with a business they suspect is a source of dirty funds and then use your business to get that money out and out of the U.S. When this information is revealed the entire business will likely be subject to investigation. If you can demonstrate that the executive was the sole one to be in the picture, this is still likely be able to harm your company’s reputation and could lead to fines as well as other sanctions. the Benex scandal during the latter part of 1990 was a scandal that involved executives from Benex International and Becs International which resulted in fines as well as prison time.
If you’re in the financial industry, getting caught up in a money-laundering scandal could end your company. With a poor image, a lot of customers could abandon the company. There are numerous cases in which banks as well as other financial institutions were forced to shut down due to the charges of money laundering. For instance, the Bank of Credit and Commerce International was shut down in 1990 due to falsifying customer transactions and concealing deposit accounts. In 1991, it was the Bank of England determined that there was such a high level of corruption and bribery that BCCI was unable to be salvaged.
Contact Infortal Today to Learn More About Anti-Money Laundering and Risk Assessment
Infortal employs open information, open source intelligence, court records financial data, black web data, and many more sources to probe the company or executive at issue. We aim to analyse the information we gather so that we can identify any real property investments, subsidiary companies aliases, etc.–that may indicate corruption, including the laundering of funds. Without this data, we can’t tell which danger you’re taking. Get in touch with us now to find out more.