Common AML Schemes: Investment Companies

Money laundering and financial crimes pose large risks to financial firms, both from a reputational and regulatory perspective. However, these schemes can take many forms making it difficult for firms to do their due diligence to protect themselves and their investors.

We’ve put together a series of the most common forms of money laundering and financial crimes and what firms can do to combat each one.

Investment Companies

Money laundering is the process of disguising the proceeds of criminal activity as legitimate funds in an effort to conceal their illicit origin. One common way that individuals may try to launder money is through the use of investment accounts and shell companies.

An investment account is a financial account that is used to buy and sell securities, such as stocks, bonds, and other financial instruments. An individual may try to use an investment account to launder money by transferring the illicit funds into the account and then use the account to purchase legitimate investments. By doing so, the individual may be able to make it appear as though the funds in the account are the result of legitimate investments, rather than the proceeds of criminal activity.

A shell company, on the other hand, is a company that has no significant operations or assets and is often used as a vehicle to facilitate financial transactions. Shell companies may be used to launder money by transferring the illicit funds into the company's account and then using the company to make purchases or investments. Because shell companies often have few or no real operations, it can be difficult to trace the origin of the funds they hold.

Both investment accounts and shell companies can be useful tools for individuals who are attempting to launder money. By using these vehicles, individuals may be able to conceal the true nature of the funds and make it appear as though they are the result of legitimate business activities.

It is important to note that money laundering is a serious criminal offense and is strictly prohibited. Financial institutions and investment firms are required to implement robust anti-money laundering (AML) policies and procedures to detect and prevent such activities. Individuals who engage in money laundering may face significant legal consequences, including fines and imprisonment.

Read about other common AML schemes

• Account takeover
• Business email compromise
• Environmental, social, and governance (ESG)

How we help

ACA’s AML and Financial Crimes practice offers advisory services and solutions to assist financial services firms in addressing threats and regulatory obligations associated with financial crime. We work with investment advisers and broker-dealers, among others, to assess risk, develop policies and procedures, and perform independent tests and gap analyses.

Our support can incorporate our ComplianceAlpha® regulatory technology and managed services to help your firm meet its data screening, ongoing monitoring, remediation and reporting needs.

Reach out to your ACA consultant, or contact us to find out how ACA can help you meet your AML requirements. 

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