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Money Laundering - What Is It?

You may have heard of the expression "Money Laundering" used frequently but may not be entirely clear on what it really means.

According to official definition, Money Laundering means:

"The process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source".

So why use the word 'laundering'?

Well, criminals will try and make the money they are trafficking appear 'clean' - they will try and filter their illegally obtained money into the financial system without arousing suspicion. Once they have successfully done this, they will then be able to transfer it globally - and often use it to fund further criminal activity.

The prevention of money laundering is therefore of great importance for regulatory authorities in all developed countries.

Today, with so many financial services available freely on the internet, it is important to know that your money is in safe hands. Therefore, it is wise to check if the money service you are using - be it a money transfer service, bank, foreign exchange broker or other service - are compliant with anti-money laundering regulations.

Anti Money Laundering Regulations - What Do These Mean?

Usually, if a company has anti-money laundering regulations in place, it means one of a few things.

These include:

  • Monitoring transactions and reporting any suspicious activity
  • Knowing the client
  • requesting valid ID for each client
  • Keeping records
  • Reporting any suspicious client activity to main regulatory bodies

Check a company thoroughly to make sure these and other regulations are being complied with.

Why am I being asked for ID?

The Foreign Exchange market is one area where anti-money laundering is of key importance - so much money is being moved around at high speed and frequency, it is key that the broker has tight regulations in place to prevent criminal activity. So, when you sign up with a money service (such as a Forex broker), you should be asked to prove your identity, and prove the legitimacy of your money.

I am suspicious. Who can I contact for Advice?

If you suspect that a company is not abiding by anti-money laundering regulations, the best thing to do is to contact the Financial Services Authority if you are in the UK. If you are dealing with an overseas company, they will fall under their local jurisdiction - which means you will need to contact their country's central regulating body. We have provided a list of World Regulatory Authorities, click on the country which applies to the company in question and they will be able to help you. Remember: if you are unsure as to the regulations in place with a money service - find out before entering into any business with them. It will mean your money and identification is safe. By reporting suspicious activity, you are helping to prevent largescale crime such as terrorism. It is not worth the risk of getting involved in a non-legitimate company or service.


Please Note: is not authorised to give advice under the Financial Services and Markets Act 2000.

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