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Money transfer vs. money laundering: how it works

Money laundering is a serious concern for money transfer firms, but could some businesses be taking the wrong approach in their attempts to cut out corruption? The Bank of England and the Financial Conduct Authority (FCA) think so, and they're worried that it could hurt customers.

According to recent reports, the FCA chief executive Martin Wheatley criticised a number of banks for "de-risking" by giving a "wide berth" to whole groups of customers. Bank of England governor Mark Carney has echoed his comments, saying many countries face "financial abandonment" as banks cut off money transfers. In plain English: they think banks are punishing ordinary people for the crimes of a small minority.

Why?

There's no doubt that money laundering has a serious impact. The Financial Action Task Force rightly argues that money laundering risks destroying the trust we have in financial institutions, as well as affecting currency exchange rates and even destabilising economic systems.

However, PwC's recent economic crime survey showed that money laundering accounts for just 11% of global fraud cases. And excessive restrictions on transfers mean vital systems for sending money overseas could be blocked, just because you live in an area considered 'at risk' of money laundering.

What's the alternative?

Foreign exchange brokers assess each client individually, ensuring that they're treated fairly, and that the money transfer environment is kept safe.

Brokers' anti-money laundering measures begin with confirming your identity. It's a simple process: you'll just be asked for documentation like your passport or driving licence, and a utility bill.

Once that's complete, brokers look out for suspicious activity, like sending lump sums overseas through a series of smaller transactions. This is often a sign of money launderers trying to avoid being tracked. It's more about trend-spotting than poking around in your finances, though.

Brokers must also keep a record of correspondence and transfer activity, to prove that both parties acted fairly and within the law. Authorities will only look at this if concerns come up, but do check your broker's privacy policy if you have any queries about this.

Ultimately, the most important element of any international money transfer is trust. That means this process works both ways – it's important for brokers to check your transfers are legitimate, but it's equally important that you know how they're doing this.

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Martin Ham

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