Signs of Money Laundering

Are you on the lookout for money laundering? Whether you own your own business or are skeptical of someone else’s money source, forewarned is forearmed. While you might think of money laundering as the stuff of mob movies, the truth is that it happens frequently in the financial world.

In the simplest terms, money laundering is accepting money from an illegal source, then trying to make it appear as if it came from a legal one. Forensic accountants can provide financial investigation services in order to identify potential money laundering, as well as the source.

Watch out for these signs

Do you know the signs of money laundering? If you’ve noticed these within your own business, marriage or other situation, you may need to work with a forensic accountant:

  • Evasive answers and general secrecy: When you’re doing business with another company, it’s fair to expect transparency and honesty. Notice if they are evasive when you ask for documentation or other answers. This is the first sign that they may not be operating above board.
  • Irregular financial transfers: Are there financial transfers between seemingly unrelated parties, or unusually high transfers between cash-based businesses? If so, take that as a warning sign that you need to get more information. If they’re evasive about the money source, take that as a strong sign to consider doing business elsewhere.
  • Reluctance to provide information: This factor goes hand in hand with evasive answers. If partners, members, clients or other parties use multiple tax identification numbers or unverifiable documents—or simply don’t want to tell you about who’s in charge at their company—move on.
  • Inconsistent investments: If your business dealings involve making investments, watch those transactions closely. Often, a fund manager will make poor investments where they “lose” everything. If the same fund manager is constantly put in this position, that may indicate money laundering is occurring.
  • Overly complex structures: Watch out for strangely complex business structures, especially if there’s no apparent reason for the setup. The more complex a structure is, the easier it is to hide evidence of wrongdoing. Multiple layers of fraud can be more difficult to uncover.
  • Negative reviews that indicate an issue: Finally, look at the business’s online reviews. If there’s a pattern of reviews that indicates they’re less than forthcoming, this may be the first hint that you’ll encounter something unusual. While this isn’t definitive proof, it can serve to put you on guard.

If you’re concerned about money laundering in your own business, use these tips to find problematic spots and reorganize as necessary. For example, set up internal due diligence checks, controls and monitoring to ferret out unethical behavior. Hiring a compliance officer to regularly scan the business can be a good way to root out problems—as well as letting employees know what’s at stake for them if there are any issues.

If you suspect money laundering may be occurring at your business, hire a forensic accountant to investigate your financials. Call Medina & Company Consulting, Inc. today to arrange a consultation.