How To Spot Signs Of Money Laundering

Money laundering is the process of “cleaning” money that comes from criminal activity. This is typically large amounts of money that need a legitimate way to make it to an individual or company because it comes from less-than-savoury means. And, small businesses could be at risk for these transactions. While I am no legal or accounting expert, here’s what my research tells me about how to spot signs of money laundering. 

Spot Signs of Money Laundering

Irregular Money Transfers

One of the best ways to spot signs of money laundering is to check for irregular money transfers or transactions. You’re looking for transactions that are unusual and shouldn’t be there. 

These unusual transactions might be unusually large. They could also be transactions that are seemingly not related to the business. Or even, transactions that aren’t going into the right account or to a business that you don’t recognize.

Unsubstantiated Transactions

Another big transaction-related thing to keep an eye out for are transactions that simply shouldn’t be there because there is no business economic advantage. 

Specifically, we’re talking about things like donations or payments to charitable organizations that have no business sense to them. Especially charities that have no actual connection or relation to your business. 

Reluctance To Provide Information

Another important thing to keep an eye out for when it comes to spotting signs of money laundering is clients or customers who are not willing to provide detailed information about their business. 

This information includes things like not being willing to provide what their business is, the purpose of it, what they do or specialize in or who owns the company. Not providing basic information like this is important to keep an eye out for.

Multiple Accounts

Having multiple or unrecognizable accounts is another way to spot signs of money laundering. This can go hand-in-hand with charitable donations. For example, if you’re donating to a charity or non profit and they are switching accounts often. 

Likewise, if funds are being sent to foreign accounts or beneficiaries that you aren’t familiar with. The bottom line is that when it comes to your own business, you should know where your money is going.

Tips to Prevent Money Laundering

There are a few steps that you as a small business owner can take to help prevent money laundering and keep your business safe. While there are, of course, not fool proof, they can help keep everything in order and give you peace of mind.

First of all, know who your customers are. Take the time to get to know them and only deal with people you are genuinely comfortable dealing with. There’s no sense in taking business from people you don’t trust!

Make sure your company meets legal requirements. The law is largely built to protect you, as confusing as it may seem at times. If you want to prevent money laundering, it’s important that you make sure you are in compliance with all of your jurisdiction’s laws.

Finally, investigate anything you think is odd. If there’s something you aren’t comfortable investigating on your own, hire out to do it.

Looking for More Money Insights?