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The Biggest Dangers of Money Laundering

When many people hear the term “money laundering,” they think about the cartel or a corrupt businessmen.  Very few people know just how common money laundering truly is. Money laundering is simply defined as “the act of disguising the source or true nature of money obtained through illegal means”. Nearly anyone in this day and age is capable of money laundering.  Be cognizant of the fact that money laundering does not even have to be cash.  Anything of value can be laundered.   You may ask yourself what’s the real harm in money laundering? We all know that it’s “bad,” but there are few resources that actually explain how and why money laundering is dangerous.  Here are a few of the biggest dangers of money laundering:

Negatively Impacted Reputation

Reputation is everything for businesses.  When clients and potential clients begin to lose trust in an institution that institution can lose business and with loss of business comes loss in revenue.  Unfortunately, this is rarely a temporary problem. When an institution gets a bad reputation, they have a hard time staying afloat. Reputations can be negatively impacted by money laundering because, if this happens within an institution, they are immediately seen as either irresponsible or liable.

Criminal Liability

If an individual or business is involved in money laundering, even indirectly, they can be held criminally responsible.  For example, if a financial institution sees suspicious activity from one of their account holders but fails to report it, they are seen as responsible in the eyes of the law.  This can result in both loss of revenue for the institution, as well as lawsuits by other clients who may have been affected by the institutions failure to follow appropriate compliance techniques.

Economic Instability

Money laundering does not just impact individuals and institutions.  It can have a negative impact on society as a whole. Because money laundering allows criminals to evade economic institutions, it can impact both exchange rates and interest rates.  When these rates are negatively affected it can lead to increased inflation and unemployment rates. In turn, this can destabilize an entire economy.

Repercussions That Hit Home

What do you think the cartel’s do with the money they are able to launder?  Well, one of the things they do is buy more weapons and their willingness to use those weapons grows with each dollar they launder.  Read up on El Chapo and Pablo Escobar…real friendly guys. What do you think terror groups do with the money that they are able to launder?  They use the proceeds to recruit, train and supply the next group of terrorists who want to blow up another building. So, by taking your money laundering obligations seriously, the lives you save may even be your own or your loved ones.  

These are just a few of the most significant money laundering dangers.  However, the list is far from complete. So when an employee asks, “Why does anti-money laundering matter?” The answer is quite simple.  By training employees about the dangers of money laundering and more importantly the benefits and responsibilities of proper anti-money laundering, both individuals and institutions can be adequately prepared and equipped to put a damper on money laundering.  If employees lack thorough anti-money laundering knowledge and skills, they may only view the concept as a simple procedural issue. If X happens, do Y. Checking a box and sending a form down the line rarely gives one a true perspective on the inherent perils of money laundering.  There’s no denying the significant dangers of money laundering. It can cripple entire corporations in minutes with nations to follow. Lives are at stake, our way of lives could be in jeopardy. Having knowledge of specific money laundering dangers and knowing the actionable steps to take when those dangers are identified can save lives and protect the well being and reputation of corporations and nations.  Literally, the life you save may be your own. If you think I’m overselling this than go visit the 9/11 museum in NYC. Speak to the thousands of family members of people killed in the drug wars, both in drug producing countries and in the streets of our cities in the U.S. Think of it every time a child goes missing and may be a victim of human trafficking. Think of it when a car gets stolen. Anti-money laundering is far from just a simple box checking exercise.  We are trying to do our best to prevent bad guys from doing bad things. Making laundering the proceeds of a predicate crime more difficult means less funds available for the bad guys, hence, less ability to continue their organized criminal activities. This is why AML matters.

I work with AML programs large and small, if you need a customized and quality anti-money laundering program, training, or advise I invite you to contact me to learn how I can help with your AML compliance. – Kevin Sullivan, CAMS, President of The Anti-Money Laundering (AML) Training Academy.

About the Author

Kevin Sullivan, CAMS, CCI is a retired New York State Police Investigator and Federal Agent who dedicated his career to AML and continues that work through his company, The AML Training Academy and Advisory LLC. Kevin coordinated AML investigations for the state of New York while being detailed to one of the worlds largest AML task forces, the NY High Intensity Financial Crime Area (HIFCA) El Dorado Task Force. He has helped develop and implement global AML guidelines and trained and advised all industries and government agencies requiring AML around the globe. He helped to write various certification programs for the Association of Certified Anti-Money Laundering Specialists’ (ACAMS) and was the co-founder and former chair of their inaugural chapter which was in NY. Follow Kevin or reserve a seat in one of his live webinars. Space is limited!

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