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Develop an Aggressive Way to Fight Money Laundering

By By Dean Reeves, CFE

Joe’s got a problem. He runs a small, family-owned plastics manufacturing business and he runs it quite well. That’s not the difficulty – he makes a lot of money for his relatives. The problem is that he’s tired of giving so much of it to Uncle Sam. Joe figures it’s time to start washing some cash.

There are two major reasons for laundering money – concealing currency from illegal activities (drugs, fencing operations, gambling, etc.) and hiding legal cash from the Internal Revenue Service to evade taxes. Joe isn’t into drug running and doesn’t have blackjack tables in the back office. He just decides that instead of reporting all his income to the IRS, he’s going to launder it and make it available to himself later.1

One night, Joe invites his family’s insurance salesman over to the house for coffee. Joe purchases an annuity from the salesman and gives him $9,500 in cash for his first deposit, which is $500 lower than the minimum Joe is required to report to the IRS. He will be able to withdraw money from the annuity with a minimal penalty. What Joe doesn’t know is that the insurance company has begun an aggressive program to fight money laundering; when Joe makes another $9,500 contribution, the company immediately notices he has exceeded the $10,000 limit in any 12-month rolling period and reports his transactions to the IRS. If the insurance company wasn’t trained to look for possible money laundering red flags, Joe would have continued his sweet scheme and eventually withdrawn thousands of tax-free bucks.

Despite the sincere efforts of legislative personnel and law enforcement authorities for the past 20 years, they continue to struggle with deterring money laundering and enforcing laws that make it illegal. More than $500 billion is laundered around the world annually.2 Large corporations must take a major role in preventing money laundering because they’re the money launderers’ prime targets.

Compliance units must not only ensure their companies are complying with federal, state, and local laws and regulations, they must also address the issues, determine their exposure to risk, and formulate a plan to minimize that risk. While a good compliance program may conform to the IRS guidelines for monetary reporting, an elite compliance program will combat the root causes of money laundering.

These four steps can help you MAPP out a plan to fight money laundering within your organization.
Monetary intake point identification
Analyze exposure
Procedure development
Produce relationships

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