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Assessing AML Compliance at Neobanks: Issues and Solutions

Considered the digital era’s answer to financial inclusion, neo-banking is rising to prominence, shattering the historical monopoly and hegemony of traditional banking. As populations across the globe are increasingly being connected to the internet, primarily throug...

Crowdfunding: Yet Another Unconventional Means to Launder Money

Having transformed many ideas into profitable businesses, crowdfunding, a new-gen investment trend enabled by the internet, has become the first resort for many entrepreneurs and small businesses. There are various crowdfunding platforms in play, involved in different models such as donation-based crowdfunding, equity-based crowdfunding, debt-based (P2P) crowdfunding and reward-based crowdfunding. Today, several billions of dollars are being changed hands through crowdfunding platforms, making them easy channels to launder ill-gotten money. According to research by Fundly.com, crowdfunding has raised US$34 billion globally and the industry is expected to grow to US$300 billion by 2025. Crowdfunding platforms, especially those dealing with investment, donation and reward, have inherent fraud and money laundering risks. “Crowdfunding service providers that collect funds for later onward transmission are particularly vulnerable to money laundering, including business models where the funds are collected for an undetermined project and consequently held in the investor’s account until the project is determined,” says the European Banking Authority (EBA) in its biennial Opinion on risks of money laundering and terrorist financing (ML/TF) affecting the European Union's financial sector. “Donation platforms can also be misused to disguise the illicit origin of funds or for TF purposes.” Criminals’ Abuse of Crowdfunding Platforms Given be...

The Crackdown on Shell Companies and the Role of Technology

The Anti-Money Laundering Act (AMLA) 2020, enacted as part of the National Defense Authorization Act (NDAA) 2021 of the US in January this year, had many key provisions to take the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime in the country to the next level. The disclosure of Ultimate Beneficial Ownership (UBO), targeted to curb shell companies, is one among them and is widely regarded as a game-changer in the country’s fight against financial crimes. The new law comes at a time when the US remains one of the easiest places to set up an anonymous shell company, according to research from the University of Texas and Brigham Young University in Australia. The situation is no different in many countries where people can create untraceable shell companies that are used to give and receive bribes, launder money, evade taxes and circumvent sanctions easily by spending a few hundred dollars. In fact, many jurisdictions have acted to address the problem and the world is awaiting good results. Here, we look to dive deep into the problem of shell companies, notable actions against them and the ways in which technology can help. What are Shell Companies? The US Securities Act defines a shell company as “a company, other than an asset-backed issuer, with no or nominal operations; and either: 1) no or nominal assets/assets consisting of cash and cash equivalents; or 2) assets consisting of any amount...

AMLA 2020: 8 Key Provisions that Financial Institutions Required to...

The US Congress passed the National Defense Authorization Act (NDAA) 2021 on January 1, 2021, addressing a variety of pressing concerns related to the nation’s security. The act included a number of reforms related to the country’s response to anti-money laundering/c...

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