Post COVID-19 Money Laundering Issues💸
24 Aug 20200 comments
For the last few months, Eco Cat news has focused on the impact that coronavirus COVID-19 has had on the supply, demand, and prices of Platinum Group Metals (PGMs). Whilst numerous COVID-19 “hotspots” remain around the globe, lockdown seems to be generally easing now and a semblance of normality is returning to the world of business.
source: Post Corona: The Supply of PGMs?
Like most industries, the scrap catalytic converter market has suffered severely since March and its participants are eager to get back to work. And, apart from dealing with the widely fluctuating prices of PGMs, one issue that has again come to the forefront is that of money laundering.
In January this year, we published an article Knowing Your Suppliers of Catalytic Converters which looked at the impact of legislation known as “Know Your Customer” (KYC). Many countries have pursued this route as part of the fight against corruption, fraud, money laundering, and other illegal activities. This legislation outlines the steps that a business must carry out to verify the identity of customers both before and during the time that they are doing business with them.
As we all know, the scrap converter market is traditionally a cash-based industry and thus prey to unethical and criminal dealings. It is therefore important that the industry is particularly vigilant in adherence to KYC protocols, although, in two key areas, this is proving difficult in these coronavirus times…
Part of due diligence in the market invariably has involved face to face meetings, inspections of premises, and site visits for assaying purposes. COVID-19 has put all of this on hold and therefore creates doubts and uncertainties around anti-money laundering efforts. Video conferencing has become the “new normal”, but many feel that identifying customer “red flags” remotely is more of a challenge.
Those involved in monitoring AML compliance traditionally rely on data analysis to track a company’s performance which, pre-COVID-19, involved tracking data over time, carrying out year-on-year comparisons. The lockdown has complicated and compromised this process - some companies closed temporarily, others suffered from restricted operations. Now it is harder to understand a customer’s new working dynamics, raising questions such as: When did they open? Is this a back-log? Is this a new intake? Thus, there is now much more complexity in the validation of quantities, materials, etc - all not helped by the inability to make on-site visits.
Business must go on, of course, and there are some potential routes to help during this period of uncertainty and change.
Invest in electronic and digital payment options
Government agencies involved in anti-money laundering are widely urging the full use of electronic and digital channels for financial transactions. These include such measures as increasing contactless limits, increasing point of sale purchase limits, raising maximum limits for e-wallets and reducing charges for domestic money transfers. In the catalytic converter recycling industry, a move away from the tradition of cash transactions will have the double benefit of reducing the spread of the virus through contactless payment and reducing the risk of money-laundering.
Of course, the market is highly competitive, and but at times it pays to talk to others in the industry. Corruption, fraud, money laundering, and other illegal activities are detrimental to everyone involved in wanting to see a responsible, transparent, and honest business. Sharing information about high-risk customers and other bad practices can only be of benefit to all.
Businesses and individuals have increasingly turned to online systems to enable remote work. Individuals under “lockdown” are also increasingly using online platforms for social interaction. This has led to a sharp rise in cybercriminals exploiting weaknesses in businesses’ network security to gain access to customer contact and transaction information. There is, therefore, a need for better organization and control, with access to company data on a “need to know” basis, and IT departments need to be on top of the latest developments in illegal activities.
in summary, vigilance and good practice are keys going forward, both in terms of protecting the health of the individual in the fight against COVID-19, and the health of the business by ensuring compliance and protection. Programs of due diligence must continue as seamlessly and rigorously as possible and it is the responsibility of each and every player in the market to act responsibly, transparently, and honestly.