When retailer turns blind eye And becomes victim

Money laundering happens in every industry and anyone can or is vulnerable to it.

We are probably all more affected by money laundering and the proceeds of crime than we actually realise.

It is something that happens all the time under our noses.

 We may be facilitating money laundering through ‘cash in hand’ businesses, by buying counterfeit goods, taking recreational drugs, using the cheap insecticides on the farms etc.

The “Markola” man or woman buying and selling can be a victim of money laundering activities without his or her knowledge and could be imprisoned if found guilty of the charges.

The retail industry or business in most countries is cash-intensive and highly unregulated, thereby giving criminals the chance to wash their dirty money.

By definition, retail businesses sell finished goods to consumers in exchange for money.

 Retail is the process of selling consumer goods and/ or services to customers through multiple channels of distribution to earn a profit.

Retailers satisfy demand identified through a supply chain.

 Retail businesses can include grocery, drug, department and convenient stores.

 Service related businesses such as beauty salons, pubs and rental places are also considered retail businesses.

 Retail goods can be sold through stores, kiosks or even by mail or the Internet (Whatsapp, Instagram, Facebook etc)

Money laundering

The washing of dirty money by criminals is not an easy task, particularly when trying to do that through a regulated industry.

 Criminals are now looking elsewhere to carry out this activity and in an environment where they are less likely to be detected.

This leaves the retail industry largely exposed to money laundering on the basis that most retailers do not believe that there is any need to instigate anti-money laundering policies and procedures.

Retail business can be or is vulnerable to money laundering and there are measures to ensure business persons don't run afoul of money laundering regulations.

The retail business owner/ person faces a lot of business challenges in order to make ends meet and one of the challenge is unknowingly providing easy access for criminals to the financial system.

Criminals use their ill-gotten funds to purchase goods from the retail shops, sell these goods to other people and collect clean cash.

Both the criminal and the retailer deposit these funds into their bank accounts.

The retailer might not even be aware of this process but will have helped the criminal wash his or her dirty money.

Business owners should watch out for the following red flags: Customers who buy goods more than the average sales made for a day; When the customer buys goods with fresh notes of high value (eg. GH¢50 notes) and the customer insisting on paying for the purchase of goods in high volume with cash.

Another way criminals launder their dirty money through the retail business is by using front companies.

Some criminals use shell companies as a cover to do business and co-mingle the dirty money with the business money and introduce the funds into the financial system when making a bank deposit.

Since the retail industry is not regulated, it is easy for the criminal to purchase a retail business for the advancement of money laundering activities.

The retailer (or anybody) can also be fooled in giving out his or her bank account details and inadvertently or unwittingly becoming money mules, as a result of scam emails or phone calls that seem legitimate.

 Through this, the retailer would be helping the criminal to further wash his or her dirty money.

Continuous training and awareness creation about the activities of criminals in the retail business sector will go a long way to enable the business owners to ask relevant questions, identify and report suspicious activities and behaviours.

Knowing

Another measure retail business owners can institute is the “Know Your Customer” (KYC) principles.

Even if your business is not a bank, you may be the victim of a money laundering scheme.

 If your business have large transaction amounts (from equipment sales or real estate transactions), or if you do a lot of business in cash (a restaurant, retail business, for example), you should be aware of where money is coming from into your business.
 
At least the business owners should be able to know their big (in terms of purchases made) customers.

Having a working relationship with these customers will help determining their source of wealth/funds and who they really are.

 The retailer should ask him or herself the following questions; Do I really know this customer?

Was he referred by a reliable source or is he/she of obscure or unknown origin?

 If a seemingly affluent new client suddenly walks into your shop, alarm bells should ring! Especially, if he/she buys more than what you sell in a day with fresh notes.

Putting in place policies and procedures will also help in the fight against money laundering in the retail business space.

 Large retail shops/business should engage people with retail experience to develop policies and procedures for their operation.

This will help curtail unethical behaviour.

In this technologically advance world, mention can be made of electronic payment system as a way to reduce the activities of criminals.

 The introduction of electronic payment system such as mobile money, prepaid/ debit/ credit cards and point of sale devices in the operations of the retailer will help prevent criminals from using their dirty money to purchase goods and services.

 At least the retailer can be assured of KYC being done on the criminal before those cards or systems were issued out.

The government can also help the retailer fight money laundering by instituting mechanisms for the reporting of suspicious transactions.

There should be reportable transaction limits set for retail business and the true identity of buyers above this limit established.

This will ward off criminals from the industry.

The twin menace of Money Laundering and Terrorist Financing (ML/TF) have assumed alarming proportions putting everybody at risk, which needs collective efforts to fight it.

 We should know that the real cost of money laundering is on our society and on the lives of victims.

The writer is a compliance specialist.
Writer’s email: [email protected]