Prevention of Money Laundering: The Practical Day‐to‐Day Problems and Some Solutions
DOI | https://doi.org/10.1108/eb027190 |
Date | 01 January 1999 |
Published date | 01 January 1999 |
Pages | 249-252 |
Author | Doug Hopton |
Subject Matter | Accounting & finance |
Journal of Money Laundering Control —
Vol.
2 No. 3
Prevention of Money Laundering: The Practical
Day-to-Day Problems and Some Solutions
Doug Hopton
It has been a truism that there is no system that is
completely foolproof and no control unbeatable,
given the right resources. Then a few weeks ago
the author read that the only way to ever overcome
the problems of financial crime was to develop in
all organisations a 'bullet-proof prevention cul-
ture'.
What a wonderful idea to have a culture
which would prevent totally all forms of financial
crime including, most importantly, money laun-
dering. But what was actually meant by 'bullet-
proof? In this case it was probably meant to
indicate a system so designed as to prevent any-
thing penetrating its defences. There are, however,
plenty of examples in history of supposedly bullet-
proof armour failing. So the truism was right all
along and while the ultimate goal must be to deter
all fraudsters and money launderers from using an
organisation's services it is essential to be practical
and recognise that this is an idealistic aim. No
system of prevention can be both foolproof and
also provide quick accessible service to the vast
majority of customers who are perfectly upright
and honest law-abiding people.
So the first practical day-to-day problem faced
by any organisation is finding a balance between
prevention and the provision of good service to
that vast majority of perfectly innocent customers.
Where this equilibrium is to be found will vary
from organisation to organisation and will depend
upon many factors particularly such matters as
regulatory pressures. So how do we find this equi-
librium? Any professional money launderer will, as
would be expected, endeavour to make themselves
and their activities appear as normal as every other
customer's. The last thing they want is to stand
out and be conspicuous. This makes the task of
preventing money laundering, or indeed any other
financial crime, extremely difficult. So where to
start to build defences? There are four major areas
that must be considered:
— the culture of the organisation;
— what is known about customers;
— the transactions being handled, business being
undertaken and the question of suspicion;
— the training of employees.
CULTURE OF THE ORGANISATION
All organisations have their own culture and while
it may not be practically possible to have a totally
'bullet-proof prevention culture it is essential that
the prevention of financial crime, especially money
laundering, is part of the organisation's culture. It
is also necessary to convey this aspect of the cul-
ture to all employees. The start point must be the
organisation's policy which should be formally
established and easily accessible to all
staff.
Such a
policy provides the primary evidence of the com-
mitment of the whole organisation, particularly
that of senior management. Without the complete
support of senior management no policy, let alone
one dealing with financial crime, can succeed.
Only if the whole organisation from the very top
downwards is fully committed can there be an
effective day-to-day money laundering policy.
The policy must clearly define responsibilities.
These are necessary to drive the policy objectives
forward. It is also essential to establish minimum
standards which not only meet legal responsibili-
ties but are practical and can apply throughout the
organisation. This is absolutely vital when operat-
ing across several jurisdictions particularly if the
home legislation or regulation requires its stand-
ards to be applied as a minimum across the group.
Having established the policy foundaton, the
next vital stage of construction is to embed the
objectives. Unless the principles of the policy are
embedded into the culture of the organisation
through process design, procedural instructions
and training it will not be effective. Obviously the
larger the organisation the longer this will take to
achieve. It is probably worth mentioning at this
point that this is not a one-off process. Ongoing
maintenance is required or the edifice will decay
and crumble.
Having established the policy and embedded the
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