What is Money Laundering? And Its Stages
Whats money laundering? The process of changing massive quantities of unaccounted money arising through a variety of crimes, including theft, human trafficking, drug trafficking, and gambling to white money complying with the law. It is referred to as money laundering. It is a significant financial crime and is carried out in both low and white-collar levels of criminals. The act of money laundering is a felony criminal offense in the UAE and a variety of other places around the world, with various definitions.
Modern technologies such as digital banking and cryptocurrencies allow for smooth transfer of funds and withdrawal of cash without suspicion. This has led to the fight against the dangers of laundering has evolved into a top priority for international authorities and also includes terror financing as one of the main goals.
Money Laundering Stages
Money laundering is a global problem for the integrity, stability, of the financial system and can have a devastating impact on the economy in general. It is also discrediting foreign investors and influencing the flow of capital across international borders.
The risk of money laundering could affect the integrity of financial institutions, stability, and performance of the overall economy, resulting in falsehoods and losses in the welfare of the economies of neighboring countries.
Following are the 3 stages of money laundering:
The primary stage of money laundering is when a person engaging in illegal activities puts money funds into the system of finance. This is so that they can wash their black currency into white currency. It is not safe for criminals to keep large amounts of cash at a time as they could attempt to squish the cash in a safer location. This is the most vulnerable level to the criminal.
Financial regulators are constantly looking for suspicious transactions that involve cash. Criminals may attempt to get around threshold reporting rules like those that oblige banks to disclose transactions that exceed an amount of money before federal authorities. This usually involves an exchange of illegal funds in smaller, less visible amounts. These funds can be exchanged for other liquid cash types like traveler checks, drafts from banks, or savings accounts.
The second stage of money laundering is to separate the money from its original illicit source. This process is usually complicated. When money is moved quickly and to various areas, it can change into a form that is difficult to see in audits. At this point, it is possible to have the money transferred to multiple countries or several individuals. The money could be in the form of different investment options to keep audits out.
The final step of the money-laundering procedure. It involves the process of returning the money to the criminals from what appears to be a reputable source. After putting and layering the funds into the financial records, the money is interspersed. This way criminals can receive funds from a primitive source in ways that don’t make the issue more visible. This could include receiving cash from a business that is purchased using the money, like restaurants or poultry farms, departmental stores, auto wash, or laundry service. The company may also follow other regulations to avoid being discovered, for example, by carefully paying all business and employee taxes and filing tax returns on the due dates.
Money laundering through Shell Companies is a very widespread procedure. But in reality, it is not the case that Shell Companies are not real. The Shell Company does not exist. Shell companies are only present in fake accounts, and there is no production or distribution occurring within these businesses.
The Recent UAE Guidance to Stop Money Laundering.
The UAE Central Bank issued guidelines for licensed exchange establishments to stop laundering money and to stop the financing of terrorism.
This guidance will assist in the effective implementation of the antimoney laundering and combating the financing of terrorism (AML/CFT) requirements for licensed money changers as well as help them understand the risks that come with it.
The guideline, which includes Financial Action Task Force standards to be considered. UAE would like to make sure that every licensed money changer within the region is aware of their AML/CFT obligations, is equipped with the right tools to detect and reduce the impact of the AML/CFT risk in their business operations and comply with the statutory requirements.
It was established in the year 2000, Executive Office of Anti Money Laundering and Counter-Terrorism Financing, an agency that deals with organizations, laundering, and those suspected of financing terrorists and organized criminals.
The Ministry of Economy set up an anti-money laundering division, and the court was set up in Abu Dhabi to handle laundering money and tax fraud.
The UAE has also joined with other nations to combat laundering. It is Financial Intelligence Unit that joined forces with the China AntiMoney Laundering Monitoring and Analysis Centre to exchange data crucial to combat international money laundering and terrorist financing.
The Role of WBS Business Solutions Auditors in the fight against Money Laundering.
According to the UAE Anti-Money Laundering Law, auditors are required to conduct background checks on their clients before entering into any business transactions. Auditors should be informed of the identity of their clients and professions and confirm their identities with reliable, authentic, independent sources. The principal function of WBS auditors from Dubai UAE is to prevent and stop any possible laundering money practices and to improve the credibility, and reliability of the information and credibility of the financial statements.
Evaluation and Identification of Risks for Auditors.
UAE Anti Money Laundering Law is a requirement for Audit professionals working within the UAE to assess and identify the risks associated with laundering money while fulfilling their tasks. According to the UAE Anti money laundering law, the Audit professionals must examine risk from two views: first, Auditors must determine and evaluate their own risk of money laundering depending on the nature and the type of their clients. The Auditor must assess and identify the risks associated with laundering of the client any time they are asked to assess the risk from the customer. Auditors must also take into account the possibility of risk from other aspects like geographic and consumer, product, and services risks, as well as a delivery channel in their risk assessment and identification.
Customer Due Diligence.
By the UAE AntiMoney Laundering Law, auditors are required to conduct required background checks before the plane with their clients. Auditors must gather information on the identities of their clients and confirm the details following. Auditors must have a process to verify their clients’ identities and their beneficial owners and their management for UN sanctions lists.
Investigate suspicious transactions Anti-Money Laundering Law.
Audit professionals are required to report unusual transactions that they observe to the UAE Federal Intelligence Unit (FIU). According to the Anti-Money Laundering Law, Auditors should immediately report any transaction that is deemed to be suspicious to the authorities. Auditors must also set up an indicator system to detect suspicious transactions.
Furthermore, auditors operating in the UAE are required to join The go AML portal. The purpose is to create a security mechanism through which Auditors can submit any suspicious transaction report to the government agency.
Appoint a Compliance Officer as per Anti-Money Laundering Law.
According to the UAE law, Audit companies must appoint an officer for compliance who must be qualified and competent to carry out the duties of compliance as defined in the UAE Anti – Money Laundering Law.
What WBS can we help?
WBS Accountants are one of the most well-known auditing firms within the UAE. Our auditors throughout the UAE help our clients with questions that concern accounting, auditing, and UAE laws against laundering money. We invite you to contact us with any inquiries concerning anti-money laundering issues within the UAE. We’ll be glad to assist you!
WBS’s Role in Preventing Money Laundering.
In the last few years, UAE has become an institution to a variety of internal companies who have established UAE as their primary location for providing services to other nations. Gentleness and good manners are the most sought-after qualities of Arab businesspeople. After a deal has been signed in writing, or verbal it becomes his commitment and you are required to adhere to the terms regardless of whether the contract is made on a verbal basis. That is the obligation of the businessperson.
A sense of friendliness is a part of living in the Arab world, and business is usually conducted at dinner or lunch – most likely in a restaurant or a hotel. It is considered to be courteous to accept an invitation back.
The favorable business environment and strong legal system that is based upon international standards have made sure that businesses can carry out without concerns and keep the worrying low.
The UAE, the Arab world’s second-largest wealthier is a law-free zone to stop money laundering and financing of terrorists. They’ve issued numerous rulings in the last couple of years to crack down on financial criminals.
But, some of the parties involved in illegal transactions may apply the methods to benefit themselves by laundering the money that is not accounted for and gathered from gambling and human trafficking, drug trafficking, and other illicit activities. Therefore, WBS auditors must play a vital part in identifying and stopping money laundering.