Is Money laundering a threat to your small business?

Tech advancements have come with many benefits, especially for business owners. Now, you can run your entire business online. However, this also comes with many risks like identity theft, cyber-attacks and money laundering. 

Money laundering might come as a shocker to many of us small business owners because many people believe that it can only affect larger businesses and co-operations. The truth is, smaller businesses face as much risk as the larger ones when it comes to money laundering. Criminals often target small businesses because they most likely won’t have knowledge or experience about it. 

What happens if your business gets involved in money laundering inadvertently?

If you unknowingly complete a transaction that is linked to money laundering, you could face major legal and financial repercussion. Depending on the extent of the transaction, you could lose your business regardless of whether the transaction was a mistake or not. 

How to protect your business from money laundering 

How to Protect Your Business from Money Laundering

Learn about money laundering schemes

All money laundering activities involve three basic steps. First, the fraudsters need to hide the source of that illegal money so it can be usable. The second step is placement. This is when the illegally earned money is now placed into the financial systems.

 During this step, the fraudsters or scammers place the money into different investments, deposits and financial institutions. Finally, there is layering where they shuffle the money around so they can create a distance between them and the illegal activities or perpetrators.

 In the past, fraudsters used smurfing to hide illegal money. It constitutes splitting large sums of money into many different accounts so they can avoid any detection. They also did wire transfers and currency. Today, they also launder money through online businesses. 

There are several ways they could do that. For instance, a client would deposit a lag some of money into your account for an order then cancels it later. When you give them a refund, it automatically turns to clean cash obtain legitimately and legally. Knowing these criminal money laundering tactics will help you steer clear of these kinds of illegal activities. 

Establish anti-money laundering policies

8 Ways to Protect your Firm from Money Laundering

Regardless of the size of your business, you should put formal policies in place to combat money laundering. Teach all your employees about what to avoid or what action to take in case of suspected money laundering activities. Money handling and accounting procedures should be strict and also included in your anti-money laundering policies. 

You also need to keep your data and financial details a secret. Don’t share information with everyone especially not strangers that you communicate with over phone or email.  Maintaining your privacy also includes using different emails for your personal and business needs. Criminals may try to use your business address to hack into your business so don’t always use it unless you are communication business only. 

Having policies within your business will help you direct all financial decisions about the partnerships and deals. They can also train your employees if you have any on how to spot money laundering schemes and ways you can avoid them. 

Do your due diligence to prevent online attacks

How to conduct cyber security due diligence in M&A transactions - iPleaders

To keep your business safe, you need to investigate everyone who handles all your business’ financial transactions. It starts by rejecting huge sums of money from strangers. Conduct background checks on your vendors, investors, partners, client and employees to make sure they don’t get your business involved in money laundering. You can easily find records for your potential investors, and vendors on the trading standard authority or at your local government. 

Keep in mind that money laundering can happen both internally and externally. When hiring, you need to vet your potential employees thoroughly, especially because they will be working directly on your online store. Scammers can also pose as customers or clients and try to lure you in through investments or partnership to disguise their fraudulent activities.  Using anti-fraud and KYC tools to monitor everyone in your business 

When you encounter investors interested in working with you on your business, always ask questions. Ask how much money they want to invest and take your time to investigate them before you make any rush decisions. 


TBN Editor

Time Business News Editor Team