DNFBP money laundering is becoming more important. DNFBP meaning “Designated Non-Financial Businesses and Professions”. These businesses and individuals play a role in the financial system, but they do not fall into the category of financial institutions. Yet, they still fall under the rules of anti-money laundering (AML).
Money laundering is the illegal process of making large amounts of money obtained by criminal activity, ‘like drug trafficking and fraud,’ look like they were obtained legally. Specifically, DNFBP money laundering occurs when businesses in the DNFBP sector pose a risk of facilitating such criminal activities if they do not comply with AML regulations.
In this article, we will see the DNFBP and why it is so important.
Why Is the DNFBP Sector at Risk for Money Laundering?
One of the reasons for the DNFBP sector being at great risk for money laundering is the high amounts of financial transactions that are not easily monitored. Many of these businesses are cash and large asset businesses that can be used to hide illicit money. Such development makes it easy for criminals to integrate illicit funds in such sectors, thereby enhancing the easy laundering of money.
The DNFBP sector is a key sector for money laundering globally, as stated by the FATF (Financial Action Task Force). The figure given by the FATF is between $800 billion and $2 trillion in annual global illicit financial flow, much of which passes through non-financial sectors.
In order to prevent money laundering, businesses operating in the DNFBP sector have to follow strict AML regulations that lead to transparency and legality of all transactions.
Examples of DNFBP Money Laundering Risks
The sector of DNFBP contains particular businesses that face higher security risks for money laundering operations. The following high-risk industries in the DNFBP sector are DNFBP examples of such businesses:
- Real estate stands as one of the core sectors used for money laundering since it involves high-value deals. The UK National Crime Agency (NCA) documented that real estate-related suspicious financial transactions constituted a twenty percent portion of their total reports for 2020.
- The transfer of undeclared funds through legal fees or settlements creates unintended money laundering opportunities for lawyers since they assist with the illegal flow of money. The sector faces intense inspection because it protects client privacy in cases that criminals sometimes exploit.
- Money launderers turn illegal cash into lookalike earnings, and casinos and gambling are often top targets. The U.S. Department of Justice also states that criminals commonly use casinos for money laundering because vast amounts of money are exchanged for chips and winnings.
Bonus: Not complying with AML regulation risks exposing your business to harm and endangering the integrity of the financial system as it moves future criminal activities along.
What Are the Key Measures to Prevent DNFBP Money Laundering?
To combat money laundering, businesses have to strengthen their strategies with the use of various important preventive measures. If businesses are to minimize their exposure, they must:
- Know Your Customer (KYC): This is the very first step for any AML strategy. The DNFBP sector has businesses that require financial information regarding the customer and must verify the identity of these customers. In this way, companies can identify potential red flags earlier.
- Recognizing signs of suspicious activity: Regular employee training programs should be included to recognize signs of suspicious activity. In 2019, the FATF discovered that nearly half of businesses in the DNFBP sector were inadequately trained with respect to AML practices in their workforce.
- Preventing money laundering: One of the important tools is transaction monitoring through technology. The FATF recommends businesses place large and unusual transaction monitoring systems, especially focusing on suspicious ones that seem out of the ordinary.
What Should Businesses Do to Address DNFBP Money Laundering?
A proactive DNFBP AML strategy is necessary for businesses to tackle the growing threat of money laundering. This strategy should include:
- Create AML Policies and Procedures: Businesses have to make clear policies on how their business is going to combat money laundering. These policies should meet local and international regulations (such as FATF).
- Technological tools: Businesses should use software tools that are capable of tracking and flagging suspicious transactions in real time. These tools can assist businesses in detecting the risk of money laundering in advance with the aim of helping prevent noncompliance.
- Regular Reporting: This helps businesses go about their transactions and comply with AML regulations. Immediately, there should be a report of suspicious activities to the appropriate authorities.
Strengthen Your DNFBP Compliance
This is the time to take action if you are in the DNFBP sector. KYC protocols, staff training, and the use of technological tools for transaction monitoring will act as a way to strengthen your AML compliance. This will enable you to protect your business from unwittingly being involved in money laundering practices.
For other guides on how to enhance your DNFBP money laundering practices and secure your business, click here to read guides on AML compliance strategies.