US-based company PayPal operates an online payments platform globally, enabling online money transfers and serving as an electronic substitute to traditional modes of transactions.
What is Money Laundering? Money laundering is an illegal scheme in which criminals make and transfer large amounts of money through disguising identity and location via different criminal activities such as drug, arms and human trafficking, embezzlement, terror financing. The laundering scheme is conducted while making the process look legitimate. The money, however, is processed via criminal conduct; hence it is called "dirty", but because of the process of making it look legitimate or clean, it is referred as "laundering". READ OUR BLOG: What Is Meant By Money Laundering? Money laundering is a dangerous financial transactions crime which is commonly performed to launder the black money or dirty money. Laundering lets the criminal transform their illegal funds into legitimate assets , which could even be a real estate property, ultimately making it look legal in the purview of the law. The criminal activities related to money laundering are conducted across the globe and are also commonly carried on by the white-collar criminals. Most of the money laundering is done in illegal narcotics trafficking. Usually, it is the criminals conducting money laundering activities for their own business purpose; these days, it is also seen that money laundering is offered as a service in the organized crime world. Various professionals such as lawyers, bankers and even accountants are participating in enabling money laundering activities. Criminals launder their dirty or black money so that they can use clean cash for everyday transactions without making it look suspicious. The laundering also helps them from preventing the funds being traced back to their illegal business activities and locations, ultimately saving the funds from getting confiscated by authorities. GOOD READ: Money Laundering and Child Abuse Suspicions Over PayPal; External Audit Ordered by AUSTRAC What Are the Commonly Used Steps To Launder Money? Money laundering is a systematic process. The three common steps which are followed by the criminals are placing, layering and integrating the dirty money. Placing: First, let us understand why this step is required. Placing helps the criminals put their dirty money into the financial system. There are various ways to do this. The first step is always critical because there are higher chances of getting the funds detected while transferring into the financial system in large sums. If it looks suspicious to the bank, there are chances of police getting informed. Therefore, many countries have defined amounts to deposit funds into the financial systems. If the payment is larger than the limit, the financial systems have to inform the authorities by mandate. These days the criminals also use alternative ways to place their money by using cryptocurrencies such as bitcoin. DO READ: Bitcoin for Beginners: 5 things you need to know Layering: This step involves transferring the funds from financial systems through complicated ways to track. Sometimes the criminal closes the course of the money once it's moved to other systems. Several transactions are undertaken in this process to conceal the initial foundation of the funds. Similarly, it's done for transactions in Shell Corporations. In some countries, the financial systems have stringent privacy laws such as Switzerland , Panama, the Cayman Islands, etc. It is difficult for the authorities to investigate once the funds are transferred into such financial systems. Integration: Now that these funds are difficult to trace back to its origin, the integration takes place. Integrating the money back in the market is the last step to clean the cash from being dirty. Casino and gambling points, real estate transactions, purchasing the securities and also life insurance policies are commonly used to integrate laundered money into the financial world. What Are the Anti-Money Laundering Regulations Worldwide? Different countries have different set of rules to combat money laundering. Although, Financial Action Task Force (FATF) works towards dealing with money laundering globally. While more than 200 countries and jurisdictions are participating in implementing FATF recommendations and policies. The agency has set international standards to ensure the states are able to prevent organized crime, corruption and terrorism. The agency also provides information on the criminals to the local authorities. Most importantly, the agency works towards bringing a political will to implement laws in these areas. The agency develops policies, recommendations with the help of its members and also provides adequate information and support to deal with the terror funding. The FATF body calls itself a money laundering and terrorist financing watchdog. Various countries came together to create this inter-governmental agency in order to combat money laundering. The headquarter of this agency is in Paris, France. The agency currently has 39 members on board along with 37 jurisdictions. FATF’s two regional organizations, the Gulf Cooperation Council and the European Commission are working towards the same goal. Apart from the member countries, 31 international and local organizations are part of FATF as its Associate Members or Observers of the FATF. How Does Money Laundering Affect Businesses? Impact on markets: Once the illegal dirty money is integrated into the marketplace, it is difficult to track back the unlawful criminal activity. While placing the funds into the financial system, the criminals also at times bribe the employees or sometimes the institutions turn a blind eye towards these transactions. It creates a doubt on the overall integrity of financial players. The evidence of such activities is impacting on the character/standing of the financial institutions. Another important aspect is the funds generated via money laundering are used in creating volatile situations in international capital flow as well as exchange rates. Most of the time, the money which is laundered is used for cross-border asset transfer. These funds once integrated into the market, creates change in the money demand. Such funds offer risk to a bank's soundness. Impact on society, democracy and law and order: Money laundering not just impact the market and economy but because it is leads to corruption, crime and terrorism, it damages the smooth functioning of the society. Unchecked or ineffective handling of money laundering can have severe impacts on the social and political aspects of the community. Once the dirty money is infiltrated into systems, it can get control of the broad sectors such as real estate investment. Once these elements take control of the society, it damages the social fabric, at large weakening the society from its core. Laundering provides safe passages for the criminals to exist and conduct furthermore criminal activities; therefore, governments take money laundering gravely. ALSO READ: Why is Governance important for banks: NAB under Money Laundering Trap
What is Fintech? Our digital world is expanding, continuously evolving and enabling businesses to become customer-centric. Just until a few years back, nobody would have believed if someone said they could transfer money from their phone only within seconds. The world is participating in a revolutionary experience, and we may not even know it. With the financial institutions providing their services online, the emergence of fintech has changed the financial dealings by 360 degrees. In simple words, Fintech refers to describing a technology which is integrated into providing financial services. Whether you are paying a credit card bill or buying a coffee at a local coffee shop or applying for a loan, fintech is with us all the time. And believe or not, it is just the beginning. Technology has entered every aspect of the world. Words like EdTech, MedTech, FoodTech are now a part of our regular vocabulary. From cashless payments apps to financial institutions providing services online to even virtual currency, the financial technology sector is growing exponentially. With integrating the latest technology in financial services, fintech is making life easier for the consumers and also for the providers. The term fintech includes a varied range of products, technologies and also innovative business models. These innovations are disrupting the traditional financial systems and changing the industry. The conventional financial services and new technology companies are now crossing each other's lanes to meet the demand from the consumers and stay relevant in the developed market. Hundreds of fintech companies emerging every day and changing the way consumers pay and borrow money. Investors are also showing keen interest in fintech companies. GOOD READ: Which are the top Fintech companies in Australia? How is the global fintech market performing? The global fintech market consists of technologies driving the change in the financial ecosystem. The services offered in the sector provide applications, processes and products for money transfer and payments, savings and investments, borrowing and also insurance. According to the Mordor Intelligence global fintech market report, the fastest-growing markets in the fintech industry are the Asia Pacific, and the largest market is in North America. A big chunk of traditional global banks, insurance companies and investment management companies are planning to integrate their services with the financial technology companies in the next three to five years. 2019 KPMG's report on the FinTech investment landscape shows that the investment reached a new record in 2018 with a whopping US$112 billion pumping into the fintech industry. In 2017 it was US$51 billion. The fintech market report by The Business Research Company states that the fintech industry market value is expected to reach US$309.98 billion through 2022. DO READ: Things You Need to Know About Fintech Financing Model: Majors in Action What are the common fintech examples that we use in everyday life? Banking: Current technology has completely changed the way conventional Financial companies use to function. Before fintech, traditional banks offered essential services such as funds transfer, loan payments, bank account overview etc. by physically visiting a bank. The fintech startups, however, have not only made the offering of these traditional services easier and faster, but the competition has led the conventional system to increase the number of services they offer. Apart from the necessary services banks these days are also offering AI chatbots, anti-money laundering systems and credit score information. These services are enhancing the user's experience. Another exciting area is Neobanks. These digital app-based banks are growing much faster than we thought. Neobanks operate online, and they do not have branches like traditional banks. They offer services in finance management by using big data and artificial intelligence. Mobile payment apps: Some of the biggest companies such as Apple, Amazon and Alibaba, have entered the mobile payment market with enormous investments. The reason is that the consumers are adopting fintech very fast. Applications such as Apple pay, Google Pay, Paypal, Amazon Pay are providing customer-friendly payment services to the consumers. They offer innovative strategies and cross-promotions with other companies, such as cashback, discounts on particular purchases etc. Insurance: Fintech has disrupted the traditional insurance market just as it has disrupted the traditional banking market. The fintech insurance startups are getting innovative and staying ahead of the traditional insurance companies. Insurtech companies are providing third party insurance, phone insurance, car insurance to home insurance to data protection. Credit monitoring platforms: Many countries, such as the United Kingdom and Australia, have complex credit score systems. Various companies offer services in order to maintain adequate credit score as for a layman building or improving credit score can get tedious and confusing. Fintech companies in this area have simplified this process. Financial technology business Clearscore provides individuals with an exact credit score, and it is also for free. There are many such startups successfully operating in this field. Robo-advisors: Robo-advising applications use technologies and algorithms to provide information on asset recommendation. These applications also help investors build and manage their portfolio and have managed to increase efficiency in the trading sector and even with lower cost. Fintech technology enables investors to manage their wealth and investment on their own. Individuals looking for investment managers to manage their assets are now often turning to fintech applications. Apart from robo-advisor services, the fintech in the trading industry has changed the way traditional trading is conducted. Investors now can buy and sell shares from their mobile phones. Virtual currencies: Cryptocurrency such as bitcoin, litecoin, and blockchain are one of the best examples of fintech. Cryptocurrency exchanges such as Coinbase and Gemini allow the users to buy and sell the cryptocurrencies on online platforms. Blockchain technology offers services such as smart contracts which utilises computer programs to automatically execute agreements between buyers and sellers or Ethereum, a distributed ledger technology (DLT) which maintains records on a network computer but has no central ledger. These technologies have practically transformed the investment world. DID YOU READ: Opportunities and Challenges for Neobanks in the Present Scenario What is the future of fintech? With fintech infiltrating every part of our financial world, it is difficult to ignore the benefits its financial technology is providing. The sector is not just helping the consumers but also putting pressure on the traditional financial system to evolve and deliver the best services to the consumers in better and faster ways. Fintech, however, like any other technology is falling prey to cybercrime. Now that fintech has proven its capabilities, the future of the industry relies heavily on providing security to its users. Most of the companies are engaged in creating awareness among consumers in order to avoid getting trapped in cybercrimes, such as financial fraud or identity theft. OTP (one-time-password), fingerprint or face recognition is trying to solve the problem. With cybercriminals staying a step ahead, financial technology companies will have to strengthen their cybersecurity to survive in the market. ALSO READ: Fintech Drives The Banking Sector: Barclays Employs Third Tech Tool
What is Financial Abuse? Financial abuse can take place across various sections of society such as family, corporates, groups, associates, nations etc. Someone essentially can use, acquire and maintain financial assets on behalf of others and stand to benefit from manipulative actions. When someone has the full-liberty to use the financial resource of others, the chances of financial abuse are extremely high. Consider the companies with independent management and Board, who can manipulate the business financially while owners would not know since they are separate. In most cases, financial abuse is generally referred to as the abuse of financial autonomy of one person, by manipulating the use of money, which was also destined for other persons in the family. People can financially abuse public policy initiatives of Government by giving false information and taking more than actually deserved. Financial abuse can be present in many other ways like – Image Source: ©Kalkine Group Also Read: Money Laundering and Child Abuse Suspicions Over PayPal; External Audit Ordered by AUSTRAC When a partner insists on taking control of money management within a family, and others have no right to make decisions, assets, on money matters. The decision will ultimately impact the whole family but are made with the consent of the only 1 person, who is perhaps abusing others financially. Financial abuse involves perpetrators who are misusing money, limiting control and consent of others in the family. The victims of financial abuse could remain incapable of fulfilling their own basic necessities, choices, and desires. These can include a choice of food, clothing, entertainment, holidaying etc. Financial abuse can leave victims without access to their own bank accounts. It leaves the person feeling isolated, depressed, anxious, and vulnerable. Financial Abuse vs Economic Abuse Economic abuse is a broader term and includes Financial abuse. Although financial and economic abuses are almost similar in nature, the basic difference is that Economic abuse can prevent the victim from gaining economic independence since the perpetrator controls earning potential by preventing them from getting a job. Economic abuse is like getting full control of the victim. It’s a larger pattern of domestic violence and includes using victim’s money and creating debt on their names, and completely use the savings of victim without consent. Sometimes perpetrators can place the victim on a strict sum of money, while also forcing the victim to beg for further money. Under economic abuse, the perpetrators also limit the use of resources by victims like vehicles or telephone. Most of the economic abuses start when the victims lack skill and education to be independent. Also Read: Coronavirus Pandemic could hit Women the hardest Older people are at a higher risk of financial abuse Elder sections of society are generally more vulnerable to financial abuse by their family members. Financial abuse of seniors is a severe problem in many countries. With rapidly developing technologies in banking, older people always remain at the risk of financial abuse since they are not generally comfortable in using the latest technology. Seniors of the society could be trained by their family members, who could also manipulate the training to benefit from the actions. Elderly people can be financially abused in several ways such as Using property or money of seniors without their consent and knowing, Forging the signatures of elderlies for financial transactions Forced to sign power of attorney etc. Family members who could be involved in the financial abuse of seniors can include children, spouse, grandchildren. There could be many motives of perpetrators behind financial abuse like insecurities that inheritance could be given to others, gambling addiction and so on. Also Read: Major global banks under money laundering cloud, are ASX banks safe? How to prevent financial abuse? Financial abuse can be prevented when people are proactive and vigilant. One should stay in touch with people who they trust and speak, these people may include friends and someone outside from family. There should be no concerns when speaking out for yourself and sharing your problems. Keeping problems and concerns within the self will only translate into further mental stress. Financial scams are growing and evolving rapidly, and one should not compromise learning how to evade financial scams. Over the years, financial scams and ways of executing them have evolved, and people really need to avoid such scams, which may leave victims in shambles. Steps The communications made by banks are faster than they were two-decade ago. It means one should regularly check emails dropped by the bank. Now checking bank and credit card statements has been easier over computers or phones, and people should constantly review these statements. When someone is borrowing or lending money, it is better to have this agreement in writing with a plan and terms of repayment. Personal documents, including financial documents, account logins, passwords, usernames should never be shared with anyone and must be protected to avoid theft. One should not sign a document, which is not understood by them. If the document is important, legal advice should be taken before considering a signature on a piece of paper, which could potentially become a reason for financial abuse. When taking legal or financial advice, the preference should be given to a person who is competent and independent and is acting in the best interest of advice seeker. Also Read: Major Banks Back in Favour But A Long Road Ahead