Anti-Money Laundering (AML) Guide for Cash Intensive Businesses

“While not every use of cash is for criminal intent but, almost all criminals use cash at some stage during the money laundering process”

Believing that the era of hard cash is over is like burying one’s head in the sand, as nearly 30% of all transactions worldwide are still made using physical cash.

In this technologically advanced era, cash-intensive businesses are considered vulnerable to mixing illicit money with legitimate funds to launder money into the financial system.

The businesses that handle transactions in cash and are more prone to money laundering are casinos, car dealerships, Hotels, Restaurants, and retail stores.

The laundering process starts by bringing the money to the premises of such businesses and handed over to the manager so that it can be added as the profit money of the day and then deposited into the banks.

This is one of the easiest ways to do placement in money laundering done

And that is the reason, we often see headlines keep coming from the regulatory bodies that billions have been fined to businesses for noncompliance, including scandals across industries and businesses.

Although organizations are following major compliance requirements, money laundering remains a multi-billion-dollar problem.

While digital currencies and complex offshore accounts are grabbing the most attention, cash-intensive business remains at the heart of many laundering schemes.

This piece of writing highlights the role of hard cash in money laundering schemes, provides real-life examples, and explains what is cash intensive business and how businesses can avoid becoming involved in illicit activities.

Do You Believe Cash Is Outdated? Think Again.

The local laundromat, the corner convenience store in urban areas, Casinos, and gambling stores are in large still handle business transactions in cash.

However, finding such businesses and using them for laundering illicit money are prime targets for criminals.

But why do launderers choose such businesses?

Because they operate in a world where cash flows like water, and that’s exactly what criminals want.

According to the Financial Action Task Force(FATF), cash transactions still account for a considerable portion of criminal financial activities, particularly in cash-intensive businesses.

Findings also reveal that this technique isn’t just used in developing countries, even in developed, and Western countries, cash is still a preferred choice for moving dirty money.

There Might be More To a Story than Mere Cover!

Discovering that a small restaurant in a bustling city area suddenly starts depositing thousands of dollars in cash every week raises the eyebrows of compliance officers.

However, in most cases, No one will bat an eye on such transactions,  because it’s a cash business.

But the real story may be the opposite, it could be not just selling more dinners, it’s about laundering dirty money.

By mixing illicit funds with legitimate daily cash flow in cash-intensive businesses, criminals can easily clean their money without raising red flags.

The Los Angeles Fashion District Raid

In a stunning operation against the launderers in 2014, federal agents raided and seized over $90 million in cash from businesses involved in laundering money for Mexican drug cartels.

They used cash sales of fake goods to sneak dirty money back into the financial system to make the money as legitimate income.

Things might have been very different for the businesses if they had robust AML software in place.

Why Cash-Heavy Businesses Are Still in the Crosshairs?

Businesses dealing in hard cash often lack AML frameworks and on the other hand, criminals are cunning,  they persist in searching where to find a weak compliance spot.

Thus, Cash-intensive businesses mean the perfect opportunity for launderers to mix high cash flow, low transparency, and a lack of digital records transactions, and even the most innocent-looking businesses can become accidental allies to criminals.

Here’s what makes these businesses so attractive:

High Volume of Cash Transactions

A high flow of cash transactions allows them to easily mix dirty money with legitimate cash flow and appear as a legitimate source of income.

Limited Digital Footprints

Having no or limited records for cash business receivers like electronic transfers makes it very complicated for law enforcement agencies to track the origin of money.

Frequent Deposits

Business owners gradually depositing cash into banking channels can mask illicit funds as legitimate earnings.

Top 2 Cases of Real-Life AML Failures

Let’s talk about what went wrong and what could have been done differently.

Crown Resorts

The glamorous VIP gaming rooms of Crown Resorts, an Australian casino company described as ‘underworld-linked’ were uncovered to have given comfort to money laundering.

It stemmed from reports that high rollers used massive cash to gamble, and when they won, they cash their winnings thereby turning what is considered as ‘dirty money.’

This scheme remained unchallenged due to the absence of proper measures though it is against anti-money laundering (AML).

Danske Bank Scandal

The Estonian branch of Danske Bank handled more than €200 billion in suspicious transactions originating from countries and individuals of high risk.

Were there a better AML framework existent, a risk-scoring system in conjunction with customer due diligence mechanisms to detect suspicious customers, this scandal may have been prevented.

Don’t Just Comply, Compete

One thing businesses need to understand is that AML compliance isn’t just about avoiding fines, but it’s about protecting your business and staying ahead of the criminals.

With a smart AML strategy, you can turn compliance into a competitive advantage. AML Watcher provides you a system that not only meets regulatory requirements but also actively monitors and detects suspicious activity in real-time.

What to Do When Financial Numbers Don’t Add Up?

Recognizing that a car dealer suddenly starts depositing $50,000 in cash regularly, it does not sound good. Because, by inflating daily sales or inventing fictitious transactions, owners can deposit illegal cash into the business’s bank account as if it were legitimate earnings.

Let’s understand it with an example of Joaquín El Chapo Guzmán, the infamous drug lord, who was known for using car dealerships and restaurants to wash his cartel’s drug money.

By falsifying sales and generating fake invoices, Guzmán’s organization could move millions of dollars undetected by financial authorities. Restaurants and car dealerships provided the perfect cover, given their natural handling of large cash transactions

Three Smart Moves to Stay Ahead of the Money Launderers

 Automate Your AML Tools

Integrating an AML system that goes beyond traditional methods of detecting suspicious transactions such as advanced name-matching algorithms and unbiased phonetic analysis based on unique identifiers and nationality not only reduces false positive rates but also allows businesses to allocate resources more effectively.

If your AML compliance software lacks these algorithms, you’re already a step behind. Having Automated AML tools means having a 24/7 security team that never gets tired.

Maintain Accurate Cash Records

To make sure the illicit funds are not mixed with the real profit, businesses must maintain a comprehensive audit trail. The trail must include detailed records of all transactions and customer interactions to ensure transparency and facilitate audits or investigations. An accurate audit trail not only helps with day-to-day compliance but also facilitates audits and investigations when needed

 Know Your Customer

Knowing whom with business making relations has become more important than ever. As for faking the identities, any potential client could be a fraudster trying to exploit your business for laundering purposes.

Implementing enhanced due diligence procedures on each customer, monitoring every transaction, and maintaining the record of all cash in and out can protect businesses from regulatory bodies’ penalties and reputational damage.

Meet Your Future Partner for AML Compliance

When it comes to compliance, checking boxes is not the solution.

That’s where AML Watcher comes in handy. Designed to help cash-intensive businesses in money laundering detect, monitor, and report suspicious transactions in real-time.

Don’t just protect your business; empower it.  Contact us to witness in action how AML Watcher can transform your compliance strategy from a traditional obligation to a competitive advantage.