Maxim Kurbangaleev, an expert in finance and business, explains why money laundering will not benefit business owners. Money laundering is a process in which illegal sources of income are replaced by fictitious legal ones.
As a rule, for this purpose companies overestimate the cost of goods or services, conclude contracts with front organizations, etc. In many countries, this activity is illegal, the fight against it is carried out with the help of special anti-laundering laws by local financial monitoring services. Despite this, the criminal scheme still attracts some business owners. Moreover, money laundering is being transformed together with the economy, involving new forms of payments in its processes.
Is it so important to check customers? Money laundering is a risk! — Maxim Kurbangaleev
“First of all, the banking sector is vulnerable to money laundering. Banks become the main tool of moving money in different schemes, therefore they have been entrusted with the responsibility for checking customers and transfers,” shares the expert.
“The KYC (Know Your Customer) procedure is a mandatory measure. From my experience it is very effective. For example, in payment systems through which people make online purchases, each customer is checked. Thus, many people are denied certain services, for example, opening an account; someone may be denied service altogether,” says Maxim Kurbangaleev.
“For this procedure there is a separate AML (Anti-Money Laundering) department, which carefully examines the company before signing the contract. I would recommend conducting such a check to all businesses, not only in the banking and financial sectors," believes the expert.
AML uses various methods to verify the legality of the company: KYC, CDD (Customer Due Diligence), EDD (Enhanced Due Diligence), risk assessment, activity monitoring. This check takes time, but it is a comprehensive analysis that helps to filter out unscrupulous customers.
Maxim Kurbangaleev shares cases from his practice. "It often happens that money laundering companies buy goods from absolutely legal and honest companies.
Honest companies, carrying out a superficial check, may not suspect that they are being drawn into a criminal scheme. But after this scheme is revealed by law enforcement agencies, these legal companies will still have to prove that they have not been willing participants in the fraud. It can be quite difficult. Therefore, it is better to be proactive and literally know your customer," sums up the expert.
Maxim Kurbangaleev: Blockchain, cryptocurrencies and money laundering
Blockchain is a relatively new technology of transfers, which has already gained a foothold in many areas. This is a continuous sequential chain of blocks containing both their own information and information from the previous block. Accordingly, changes in one block will entail editing of subsequent blocks. Since copies of chains are often stored on different computers, it is almost impossible to do this.
On the one hand, this technology ensures transparency of operations, because all technical details will always be at hand. On the other hand, if this data gets to unscrupulous companies or third parties, transfers become absolutely unprotected.
Blockchain technology is the basis of cryptocurrencies turnover. Cryptocurrencies are electronic money, which in fact are regulated not by banks or government agencies, but by users who store chain data. Despite the fact that cryptocurrencies and blockchain in general were created to maintain the freedom of financial relationships, fraudulent money laundering schemes have also broken into this area.
However, Maxim Kurbangaleev does not want to denigrate the entire cryptocurrency sphere. "Crypto exchanges are absolutely legal. Some countries prohibit or do not regulate this area, but there are many jurisdictions where payment for goods or services with cryptocurrency is legalized. In this case, the cryptocurrency blockchain meets the same requirements as classic fiat banks, which means that it is necessary to comply with the same requirements for combating money laundering, such as passing KYC, and assessing risks. Therefore, it makes no sense to create some fraudulent schemes to cover up the cryptocurrency business. It is much easier to change the country of registration and play by the established rules," explains Maxim Kurbangaleev.
Major market players are never involved in money laundering, and for good reason! — Maxim Kurbangaleev
Maxim Kurbangaleev believes that illegal companies have no prospects. "The business should be capitalized and scalable. It is impossible with a fictitious company. In fact, it costs nothing on the market. Who wants to pay for such associated risks? Look at the major global companies, such as Apple, Facebook, SpaceX, Revolut. Their businesses are absolutely legitimate and understandable, they have a transparent structure and identified customers. These companies prove that you can earn more in honest business than by trying to launder money, fooling people and engaging in other illegal activities," says Maxim.
The expert also noted that it is worth separating money laundering and tax evasion, although at first glance the schemes may be similar. "Laundering is still about money that is obtained by criminal means. Some companies are engaged in legal business, but do not pay taxes, saving money. This is also illegal, and these schemes can also be tracked if a preliminary check is carried out. Therefore, I repeat once again: know your customer!" reminds Maxim Kurbangaleev.
Thanks to improved methods of checking companies, it is becoming easier to track the dirty scheme, which means that the risk of running a fictitious business significantly exceeds the benefits that it could bring. "I believe that a dialogue between the government and future businessmen is necessary, that education should be the first step.
Young people should understand that even if they hit the jackpot today and earn a large sum on illegal schemes, it is unclear how it will play out tomorrow. Huge fines, confiscation of property, and even a real term can be the consequences. We must promote honest and open business," believes the expert.