How banks prevent Money Laundering

July 27, 2022 2:24 pm

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One of the most common crimes that criminals attempt is money laundering. Banks and financial institutions are very aware of how nefarious activities create money and a cash-rich one at that. However, whilst criminal gangs or individuals may well be sitting on a large amount of paper cash or goods, they will want to start to earn interest on it to make it grow. They are just as aware of the need for prudent financial planning as the rest of us.

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Money can be laundered in a number of ways, but the two most common are to open a regular bank account or to use the money as a deposit on a house or an oversized item that is then sold. Once the property is sold, the money becomes “clean” and can be deposited in a bank account or savings account. Direct transfer is trickier for criminals. A large deposit to open an account results in checks and questions, namely, “where did you get this money from?”. Slowly making deposits in cash every week can also raise suspicion.

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Banks ask for proof in some cases. Evidence of an inheritance or receipt of a sale, for example. With mortgages, you cannot sell a property you have bought within six months of the purchase. Banks and the law work on the assumption that criminals need cash to flow quickly rather than sit around on it. Finally, banks have KYC like that from https://www.w2globaldata.com/regulatory-compliance-solutions-and-software/know-your-customer that allows them to verify the identity of their customers.