Businesses should look out for warning signs across the three money laundering stages. Financial risk experts, Red Flag Alert, suggest the following key risk drivers:
- The size, nature and complexity of a client's business structure. Organisations with wide, branching corporate structures can pose a greater financial crime risk.
- The type of customer involved - B2B or B2C.
- The types of products and services involved in a transaction.
- The methods used to onboard new customers and communicate with existing ones.
- The geographical factors in a transaction.
- An international element to a transaction or commercial relationship. Overseas transactions can significantly increase the risk of money laundering and terrorist financing.
- The substance of a transaction. For example, high-value transactions generally pose a greater risk.
- A transaction involving a commission payment that could give rise to a conflict of interest.
- The involvement of third parties, especially if they are paying or being paid. Third-party movement of assets can contribute to money laundering, so it's essential to identify the source of funds for each transaction.