How to avoid becoming part of a money-laundering scheme
Did you read last months’ headlines about Nordic banks being investigated for laundering hundreds of billions of euros stemming from organised crime and questionable customers, like Ukraine’s ex. president Viktor Janukovytj and the Russian oligarch Iskander Makhmudov? What started off as a whistleblow by the previous head of Danske Bank’s trading unit in the Baltics has led to one of the biggest money laundering scandals so far, and caused great monetary and reputational damage for the investigated banks and their shareholders.
Scandals like this raise the question whether we at Stora Enso need to take action to prevent us from being used by criminals in money laundering processes. The answer is: yes. With this article, we hope to briefly explain what money laundering is, and remind you about what you can and should do to help Stora Enso avoid being part of any money laundering scheme.
Although the money laundering cases that hit the headlines typically involve major financial institutions, the crime is not limited to banks and credit unions. Even manufacturing companies like Stora Enso could be used for money laundering purposes if we are not careful. Therefore, there are certain questions that we must always be prepared to ask, such as: Why does the customer use another account that usual? Is it not strange that the supplier wants to get a refund to an account in Jersey? And should I sign the deal even if the customer refuses to give me the company’s registration number?
Before reminding ourselves about our obligations, let us have a look at what money laundering actually means. Money laundering can take many forms, but its ultimate aim is always to hide the source or destination of money. There are two general types of money laundering. The first one turns “dirty money” (that stems from illegal activities such as trafficking or financial crimes) into “clean money” (that appears to come from a legitimate source and can be spent without attracting the attention of law enforcement). The second type of money laundering seeks to hide the movement of money for use in illegal activities, such as terrorism or by criminal organizations including drug traffickers.
The money laundering process varies with the purpose of the laundering, but typically includes three steps. First, dirty money is inserted into a legitimate financial institution, often in the form of cash deposits to banks (placement). Then the money is moved through multiple financial transactions, often covering several countries, to make the money difficult to track (layering). Finally, the money is moved from its hiding place into the legitimate economy (integration). This last step can involve selling certain expensive items (like jewelry or houses) that were originally bought with dirty money, or “investing” in a legitimate business with funds transferred from the last bank in the layering chain. By now, the money is very hard to trace and can be used without much fear of being caught.
To prevent being part of this chain of illegal events, Stora Enso strictly prohibits knowingly engaging in transactions that facilitate money laundering and terrorist financing or that otherwise result in the unlawful diversion of assets. We are committed to conducting business only with customers who are involved in legitimate business activities, with funds that are derived from legitimate sources. For upholding this policy, Stora Enso relies on its employees to help detecting customer relationships and transactions that may involve money laundering.
For Stora Enso, the risks for contributing to money laundering are especially high if we issue refunds, make any sort of return payments to third-party payors or engage in transactions where the product is not delivered or that otherwise bear the trappings of trade-based money laundering schemes.
Another risk factor that we should all be attentive to is when we deal with business counter parties in the so-called Tax Haven Countries. As some companies use Tax Haven Countries for tax fraud, money laundering or other illegal schemes, Stora Enso only allows engagement with a counter party domiciled in a Tax Haven Country after a successful substance test (which is to be retaken every second year). Moreover, payments to a bank account located in a Tax Haven Country are never permitted if the contracting party is not domiciled in the Tax Haven Country.
The following events or activities may indicate that money laundering and/or terrorist financing is taking place:
- A customer, agent, or proposed business partner is reluctant to provide complete company identify information or provides suspicious information;
- Requests to make or accept payment in cash;
- Structuring of transactions to avoid record keeping or reporting obligations;
- Unusually favorable payment terms;
- Orders or purchases that are inconsistent with a customer’s normal business;
- Requests to make payments to, or accept payments from, third parties;
- Unusual funds transfers to or from countries that are unrelated to the transaction;
- Unusually complex deal structures, or payment patterns that reflect no real business purpose; or
- Transactions involving banks in tax haven countries or unlicensed money remitters.
We must all take the lead in doing what’s right. Should you become aware of any suspicious activity, you must immediately raise your concern with Legal. You should not proceed with any relationship or transaction that you believe raises any money laundering concerns until those concerns have been investigated and addressed by Legal, and you have been given confirmation that you may proceed with the relationship or transaction.
With this, we hope you have gained some further knowledge about what money laundering is, and what you can do to help Stora Enso avoid becoming part of a money laundering scheme. Now, please take the time to review the sections on anti-money laundering and Tax Haven Countries in the Business Practice Policy (see chapter 9), share this Ethical Spotlight with your colleagues, and keep your eyes open!
Ethics and Compliance