What is money laundering and why should we care?

Malcolm Wright

 · 05/10/2018  · 05/10/2018

Updated October 2020

If you’ve ever binge-watched Netflix or catch-up TV, you may have come across popular series like Narcos, Ozark or McMafia and asked yourself, 'What is money laundering?'.

What you might not know is that these programmes are based on real-life events, more specifically, some of the biggest money laundering cases in history.

What is Money Laundering? 💰

Like money laundering on TV, real-life criminal organisations are constantly coming up with more creative ways to convert their illegal proceeds into legitimate money through the use of cash businesses, low value electronic payments or cryptocurrency proxies.

The practice of making illicit funds seem legitimate. Preventing criminals from laundering money is known as Anti-Money Laundering or AML.

But why should I care? 🤔

Every crime has a victim and every crime harms society. When people think of crime and banks they often think of card fraud – someone stealing card details and then spending the money without the owner’s permission.

However, banks are used by criminals to launder illegally generated funds. You can watch some big-name examples in Netflix’s ‘Dirty Money’. 🏦

How can money laundering be prevented? ✋

In 1989 the Organisation for Economic Co-operation and Development (OECD) created a Financial Action Task Force (FATF) to work on preventing money laundering.

Since then 180 countries have passed its recommendations into laws which every country must uphold. Financial regulators must ensure that each country must abide by the FATF recommendations.

Like all financial institutions, to keep our customers safe, Revolut must abide by the laws and regulations required by the financial regulators in the countries where we operate. In the UK we operate under the Financial Conduct Authority (FCA) and in Lithuania under the Bank of Lithuania.

As we expand, we’ll also have to follow the laws of other countries too. If we don’t, we can be hit by serious fines or risk being closed down. So, it’s really important to us that we’re doing a good job.

So how much cash is involved in money laundering? 📊

These figures are astronomical, but what you may not know is just how interconnected all these seemingly different types of crimes are. 🔄

Criminal gangs now work together to commit crime and share the proceeds, making it even more important to find it and stop it. 🚔

For example, buying a fake watch from a street seller when you’re on holiday is far from an innocent purchase. Believe it or not, buying fake goods can aid human trafficking, smuggling, child labour, drugs, and even fund terrorist activities - there is a great TED Talk video covering this topic.

Here’s another troubling statistic: there are currently around 40 million people in the world living in slavery at the moment, held against their will, living in terrible conditions, with no life of their own. There are now more people caught up in modern slavery than at the height of the slave trade a couple of hundred years ago.

There are 40 million slaves in the age of the internet, social media and challenger banks. Stopping money laundering helps break those crime networks. This is why anti-money laundering is a top priority for us. 💪

So, there is an important social and ethical reason for stopping money laundering, not just regulations or fear of losing business. At Revolut, we believe in doing the right thing, and so a lot of effort goes into preventing our products being used for illegal activities.

So, how does Revolut handle AML? 👮‍♂️

Like all financial institutions, we follow the rules and guidelines set out by the regulators. This includes making sure we:

  • 🆔 Collect identification and documentation from you when you register with us, and then verify it (this is why we ask you to take a photo of your ID when you sign up)

  • 🤔 Make enquiries if we need to understand how you’re using your account and the money you pay in and take out of it (for example, we may reach out to you via chat if we need to clarify any account activity)

  • 📑 Ask for further documentation from you when you reach your account limit or make certain types of transactions, so that we can understand where the money has come from. This is called a ‘Source of Funds’ check

We also run advanced software that detects unusual behaviour. This might help to uncover fraud, flag potential money laundering or expose illicit activity. We can’t tell you how this software works but it’s pretty cool and very smart – our data scientists have been busy! 👩‍🔬

Money laundering has implications for society far beyond financial crime, affecting millions of people around the world.

As well as creating a superapp and developing tools to help you manage every aspect of your financial life, we want to help make finance a safe place - for everyone. Our innovative tools can make your life easier and we’ll use data science, machine learning and technology to disrupt and prevent crime and the injustices it perpetuates. Then we can all sleep a little easier.

💡Now that you know how we stop criminals from moving money around the world, learn how your money actually travels through the financial system 💸