In recent years, UAE has become home to many internal businesses who have made UAE their main bases to cater services to many other countries. The business-friendly ecosystems and a robust legal system based on international standards have ensured companies can carry out their business activities with minimal issues and keep worries at bay. However, some parties dealing with the illegal trades may use the system to their advantage to launder the unaccounted money earned from gambling, drug trafficking, and other unlawful activities to clean money. Hence, the UAE auditors play a crucial role in identifying and preventing money laundering.
Money Laundering
Money laundering can be defined as a process of changing vast sums of unaccounted money obtained from crimes such as theft, drug trafficking, gambling into origination from a legitimate source. It is a serious financial crime that is practiced both by white-collar and street-level criminals. Money laundering is a punishable crime in the UAE and many other locations worldwide with varying definitions.
In recent times, modern technologies like online banking and cryptocurrencies have eased transferring funds and withdrawing money without any detection. As a result, the prevention of money laundering menace has evolved into an international effort and includes terror funding as one of its targets.
Process of Money Laundering
The first stage of money laundering occurs when an individual involved in criminal activity injects the cash proceeds from the trade into the formal financial system. Layering is the second step of the process executed to make it difficult for financial authorities to trace the illegal money in the system. After moving the dirty money into the financial system, the funds will be either converted into legal monetary instruments or used to purchase assets to be monetized later to make tracing impossible. The final third stage is to retake the cleaned money back without the knowledge of the government.
Money Laundering through Shell Companies is a common technique. However, in the actual world, the Shell Company does not exist. Shell companies exist only in fake records, and no goods production or distribution will occur in such businesses.
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