The technological world has taken many steps to ease life and freelancing is one of the biggest steps. The majority of the people across the world are moving toward freelance platforms for a handsome income from the comfort of their homes. It allows people to focus on several aspects of life simultaneously, while their professional life is not compromised at all.
The number of freelancers has significantly increased over time and it contributes to a population called the ‘gig economy.’ Although contractual jobs sound terrific, the digital world has opened gates for fraudsters. They now have more sophisticated ways of fulfilling their evil desires. Identity theft, account takeover, fake job posts, prepayments, and offsite payments are some of the scams in the freelancing sector. Money fraud is the most common one and almost every freelancer faces the scam at least once in their freelance career. Did you know money laundering has also taken the gig economy road in the last few years? It may come to you as a surprise but fraudsters are now using freelance platforms to launder money. Keep reading this blog to find out how it is possible and what is the solution for combating this problem.
Money Laundering through Freelancing
Sadly, it is not just the financial institutions anymore for anti money laundering. Concealing the origin of illegally earned money is now possible through freelancing platforms. The surprising part is, the majority of victims do not realize that they have been the target of money launderers. How is money laundering through freelancing possible?
Well, in the past few years, launderers have been using third parties for transferring money. Criminals hire people that transfer the illegal funds from one account to their bank, and the funds are then transferred to a second account (destination). This third-party is also called the money mule. Banks are already working on ways that can identify money mules and prevent money laundering. However, not much progress has been witnessed until now. This was an example of someone who deliberately became a part of the laundering chain. On a freelance platform, fraudsters get in touch with workers and award them a project with a sound budget. Upon completion, the candidate is paid as well. Hence, there is no chance that someone could identify a money launderer at this stage. What goes wrong then? The employer transfers money to the employee’s account and asks him/her to transfer these funds to another bank account. Since the worker is paid, he or she might agree and transfer money. Unknowingly, the freelancer becomes a money mule and becomes a part of the laundering chain. If banks or regulatory authorities take action for the matter, you (the freelancer) will be interrogated as well.
How to Prevent Money Laundering from Freelancing Websites?
Adding AML software to the platform for customer onboarding is an effective way. Robust verification means the platform checks government-issued documents for forgery and the provided information is also cross-checked with several lists like sanction lists, PEPs, etc. This will help the freelance platforms to onboard individuals who are legitimate and are not involved in any illegal activities.
During an AML screening, the candidates have to provide all necessary documents and get their identity verified. Businesses can onboard legitimate customers and secure the entire platform for workers. Hence, preventing money laundering will not be a problem.
It all adds up to the fact that money launderers have taken the new road to fulfill their desires. The gig economy is not free from them now and many workers become money mules in the laundering business without knowing anything. Adding stringent AML checks can help the platforms be a credible source of income for legitimate users. Furthermore, it can help firms to comply with the KYC/AML compliance of the state.