why money laundering is the new global epidemic

Superyachts seized, banks sanctioned and assets frozen. The Ukrainian conflict has brought to light a problem that has been bubbling under the surface for many years: Russian money laundering.

The wealth of Russian oligarchs is not new. London even has a “red square” of real estate owned by Russian billionaires. However, as each penalty is handed down, it becomes increasingly clear that money laundering is rampant in the UK and beyond. In fact, the BBC recently reported that “at least £1.5 billion of Russian-owned British properties [has
been] accused of financial crime or having ties to the Kremlin.

Although many Russian oligarchs and corporations are now on the sanctions list, money laundering is not a problem that will go away anytime soon. Banks, law firms, accountants and real estate agencies need to properly identify and verify customers. Taking shortcuts or missing key parts of the process will result in hefty fines and brand damage.

The Risks of Missing Money Laundering

The usual way Russian oligarchs hide their “dark money” abroad is through shell companies. This is a company that exists only on paper and has no offices or employees, but may have a bank account, hold passive investments, or be the registered owner of assets, such as intellectual property or ships.

British Overseas Territories such as the British Virgin Islands and the Cayman Islands are favorite destinations for this business – and these tax havens provide a direct route into the UK economy. The oligarchs then hire the best lawyers, auditors, bankers and lobbyists from around the world to develop legal ways to conceal and launder their funds.

Despite being reputed to be a playground for Russian money laundering, the British Parliament has in the past been accused of “turning a blind eye”. It was only due to recent events that the government took action by reintroducing the Economic Crimes Bill. This will establish a new register listing the ultimate owners of property or land in the UK that has been purchased by foreign entities.

That’s all well and good, but what are the direct risks for companies?

Besides the ethical implications of being wrapped up in corrupt money laundering, businesses – from real estate to banking – need to consider what is at stake here. On the one hand, the legal and regulatory penalties are becoming exorbitant. NatWest was fined a whopping £264.8m last year after being convicted of three separate offenses relating to anti-money laundering failures. On top of that, you need to consider negative publicity; damage to the company’s reputation and a negative effect on the bottom line.

Ensure your processes are rigorous

None of these fates are particularly attractive. That’s why compliance is a must – regulations protect us from crime and ensure that businesses meet legal requirements. But that doesn’t mean it’s an easy task.

Money laundering can be difficult to spot if you don’t know the signs. After all, the people who do this work hard to keep the authorities in the dark. In addition to complying with AML regulations and doing due diligence when onboarding a new customer, it’s smart (and for regulated companies, mandatory) to keep an eye out for irregular activity and things that go wrong. just don’t match.

As new data suggests that UK properties worth around £1.5bn were bought by Russians with Kremlin links or oligarchs who are the subject of corruption allegations, here are some red flags to watch out for when it comes to real estate.

The first red flag is third-party involvement, as someone other than the buyer handles most of the purchase, or the buyer joins the process at the last second to avoid background checks. Another red flag is when a property is being sold at a price that just doesn’t seem right – for example, the purchase price is much higher or lower than expected. This could be a sign of price manipulation.

Of course, it’s not just the UK property market that the oligarchs are using to hide their ‘dark money’. And red flags aren’t necessarily proof of illegal behavior, but they could indicate that further investigation is needed.

This is where new technologies have a crucial role to play. We are seeing an increase in the number of companies using managed services or introducing technology into their AML processes as they look for ways to streamline their operations and stay one step ahead of criminals.

Digitizing compliance or using AI for transaction monitoring has several benefits. This means your records, customer details and transaction data are stored in one place. The structure and documentation for all beneficial owners is clear, with your risk assessments on each customer easily auditable. It’s all about freeing up administration time, not just meeting compliance requirements.

The Future of Money Laundering and Russian Sanctions

In a time of heightened scrutiny of the UK financial market and in the face of Russian sanctions and government financial misconduct, there has never been a better time than now to tackle money laundering. There are many ways to manage compliance, but the important thing is to have a process in place, so you and your staff don’t miss any crucial details or signs of illegal activity.

Comments are closed.