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Dealing with Money Laundering during COVID-19

The pandemic has affected the lives of millions. While the migrants and poverty-stricken are finding ways to make ends meet, perpetrators are taking advantage of the situation. Cybercrimes and money laundering are on the rise due to COVID-19. On one end of the spectrum, money laundering issues might not be a priority in this plague. However, on the other end, some have been victims of the same.

Money laundering investigation companies are having a hard time managing the workflow because of several reasons. Let’s take a look at them and explore what financial institutions are doing.

Why Is COVID-19 Creating Financial Issues?

As a result of government restrictions, financial institutions have no choice but to work from home. People are making online transactions more than ever, as ATM services are limited. A lot of paperwork and verification has to be done from home. This creates a crease in the system. Criminals have been using this opportunity to exploit those who are new and vulnerable to technology. “Organized criminals are exploiting the fears of consumers, some of whom have to use online systems for the first time,” says lawyer John Binns.

The last few months have put a halt on banking procedures, which require face-to-face communication. Nevertheless, this is being done through technological tools in many places. Government-issued IDs and documents have to be cross-checked through video calls and screenshots, for instance.

Small Businesses Might Unknowingly Be a Part of Money Laundering

Anyone who goes against the government circulated regulations and restrictions, is committing a crime. Migrant workers and laborers survive only on daily wages. Small businesses, at the same time, are facing financial issues due to the shutdown. Those who fall into these two categories have lost their income completely for an indefinite period. Manufacturing companies are facing the worst hit by the pandemic. The option to work from home is not feasible for them.

“Above all, solicitors should continue to ask questions, to know their clients and the markets in which they operate – and to understand their sources of wealth. For example, would it make sense that a business client in an industry forced to close, is still generating revenue or has money to invest? Taking time to pause and ask these questions is vital, perhaps even more so in times such as these.”, says Graham Mackenzie, Head of AML at the Law Society of Scotland.

In times of desperation, these businesses argue on restrictions imposed. If they decide to call even one worker, they may be criminalized. If small business owners try to carry on some functions in the company and keep the work going, they become felons of money laundering. It is very difficult for institutions to keep track of this, in turn, increasing the load on their employees.

However, the question is, how far institutions should go when it comes to labeling this as “money laundering”? Also, how are they are going to handle the burden with existing loopholes?

money laundering

How Are Financial Institutions Dealing with Money Laundering in COVID-19?

FATF (Financial Action Taskforce) has designed Anti-Money Laundering and Terrorist Financing (AML/CFT) guidelines for finance departments. Under the COVID-19 restrictions, these guidelines have been modified. There have been additions to it to deal with the pandemic situation, and many organizations have been doing it independently.

An increase in money laundering crimes has placed banks under scrutiny. STR, that is, Suspicious Transaction Reports, have to be submitted by financial institutions. It has added a major workload, especially without access to data centers. Thus, slowing down the process.

“It’s a myriad of economic programs that are regulated by different agencies. That would be one thing that may cause delay to existing cases, particularly if there’s not a real-time crunch on resolving them,” says Terrance Grugan, an attorney at Ballard Spahr.

Another obstacle that falls in the way of dealing with money laundering during COVID-19 is the connectivity and integration of institutions with one another. While some institutions work independently, others work in coordination with their parent organizations or in groups. Losing contact may pose a threat to supervisory institutions.

“There is anecdotal evidence that some agencies have slowed their investigations as remote working impacts matter management,” stated a report.  Some attorneys from different global offices of law firm Skadden have written the report.

Why Should You Worry about Money Laundering?

With thousands of people dying every day, there’s a good reason for you to ask why money laundering is a concern. The pandemic has hit the economy worse than the great recession in 2008. Equity markets and jobs have plummeted, and credit spreads have bumped up.

In this crisis, cybercrimes, frauds, exploitation, and money laundering have become the main focus of investigation institutes. An investigation by Action Fraud revealed that there have been 21 cases of fraud linked to COVID-19, with a loss of 800,000 Euros in total. Given that these are only limited statistics, it is certain that one is prone to financial risks and fraudulent.

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