What Small Businesses Need to Know About Money Laundering

Money laundering is in the news at the moment because of the new legislation around the so-called 'two tier regime'. What is it, and why are small businesses at particular risk from money launderers? Here's what you need to know.

The risks of a two-tier regime

There are growing fears that anti money-laundering (AML) laws that came into effect in summer 2017 might end up creating an two-tier regime, thanks to differences in the way accountants who belong to a professional body and those who don't are treated. Chartered Accountants Ireland says the new law might easily result in inconsistent supervision, since it ignores accountants who are not members of a relevant professional body. These accountants are also supervised by HMRC, of course, but the standards HMRC has set are nowhere near as rigorous and detailed as those set by proper professional bodies.

What Small Businesses Need to Know About Money Laundering - aben bookkeeping

How does the law put smaller businesses at risk?

Money laundering may seem like something that only affects big business. But in fact smaller businesses are at just as much risk of falling foul of money launderers. So how do you reduce the risk to your small business? For a start, everyone in your business should be made aware of the risks and play their own part in creating a solid anti-money laundering culture. For small businesses that don't have a compliance team, it's absolutely crucial.

The key to everything is to create a solid, workable, risk-based due diligence process. Making due diligence part of your everyday routine is one of the best ways to avoid being unwittingly towed into murky waters. It can mean something as simple as applying common sense and keeping your instincts honed.

If something seems overly secretive or complicated, or doesn't make much business sense, it's likely to be worth looking at more closely. Inconsistent information of any sort is a clue. When there's a complex group structure that hasn't been clearly explained, that's another red flag. And if the ownership of assets isn't clear, it's time to step back and do some investigating. If a transaction simply makes no sense in a business context, or a client doesn't give a good enough explanation, it's another clue that all may not be what it seems.

Client checks are your best friend. Thorough investigations into the companies you work with are already essential for new and potential clients, but they're also important for clients you've had for some time, simply because times change, people change and businesses change. It's even more important to carry out careful checks if a client business has changed directors, expanded or merged with another.

Technology can make things tricky, disguising organisations that want to make themselves seem legitimate. If a client seems reluctant to meet you face to face, ask yourself why. And creating cordial personal relationships with your clients can help a lot. Don't be scared to ask clients questions about their business. Once you've made the effort to truly understand a client on a personal and commercial level, it's easier to spot potentially dodgy activity.

what to do if you suspect money laundering - aben bookeeping

Take great care around unsolicited emails or phone calls from people wanting to invest in your business. Never share your financial details. Always do your due diligence before accepting an investment. Make sure the potential investor is officially registered as a business in the country they operate out of. And get in touch with the relevant trading standards authority or local government department to ask if they've had any complaints about the investor.

Even the most sophisticated criminal organisations can easily come across as totally legitimate. Bear in mind that if it looks like a rat, smells like a rat and sounds like a rat, it's probably a rat! The only way to sort the legitimate from the dodgy is to do your due diligence, remain vigilant, ask questions if you spot any suspicious activity at all... and listen to your instincts.

What happens if you inadvertently get involved in money laundering?

Money laundering scandals are always serious. They damage your reputation within your sector as well as with your customers. It can force your business insurance premiums sky high. And because the activity is illegal, you could easily face sanctions, sometimes even prosecution and a spell in prison.

What to do if you suspect money laundering?

According to ActionFraud, the UK's national fraud and cyber crime reporting centre, if you suspect money laundering you should report it to them straight away. You can call them on 0300 123 2040 or use their handy online reporting tool (http://www.actionfraud.police.uk/report_fraud).


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