Today due to massive developments in communication and technology, money can be transmitted across the globe with speed and ease. While this is a big boon to businesses, it has also brought to light the need to tackle the problem of money laundering. The process of using money obtained from crimes like drug trafficking, terrorist activities and other illegal means as money from legitimate sources in the financial system is called money laundering. UNODC estimates that roughly 2 to 5 % of global GDP is laundered every year – this amounts to US dollars 800 billion to 2 trillion!
Implications for Financial Platforms
While money laundering often happens in financial institutions. The Prevention of Money Laundering Act 2020 mandates the investigation of money laundering offenses in India. Private banks, public sector banks and insurance companies have started sting operations to discover money laundering. The recent rise in other means to transfer payments means that online payment processing platforms too need to watch out for money laundering.
How Is Laundering Done?
Money laundering is usually done by the physical disposal of bulk cash obtained from illegal activities. Sometimes, a complex layer of financial transactions is created to separate illegal money from its source. This is done to disguise the true source of money. The money is then put into regular financial systems via drafts or deposits. Sometimes companies are created on paper and money is moved via fake bills and invoices. This laundered money then flows through the economy as normal business money.
There are a number of steps which can be followed to detect and prevent money laundering. In India, financial institutions are required to follow KYC guidelines and a PAN number is asked for every financial transaction.
As a consumer, you can also do your bit. Make it a point to close any dormant accounts as they can be easily misused. Also be cautious while allowing others to use your bank accounts for transferring money especially from outside the country.
Payza Anti-money Laundering
Payment processor Payza uses a variety of tools and techniques to fight fraud. This includes account verification, encryption, and the Payza fraud prevention matrix. The fraud matrix is Payza’s proprietary tool that monitors online behavior in real time and looks for patterns typically used by fraudsters and cyber criminals. Payza fraud matrix is frequently upgraded as cyber criminals are quick to come up with new means of committing frauds.