Cosmetics Industry on the Screening Radar-Need Smart AML Compliances

Cosmetics Industry on the Screening Radar-Need Smart AML Compliances

Financial fraudsters always look for some big price tag items for illegal purposes and the fashion industry is still out of mind from the legal experts. Various financial sectors have compliance structures but the cosmetics industry is still working without proper checks and balances. In the cosmetics sector, hefty revenues are transferred without AML compliance procedures. The global market is badly facing the brunt of exponential money laundering activities. Stringent steps are required to curtail the anti-money laundering culture.

Bloomberg reveals $1 million worth of counterfeit actions in the cosmetic sector. Another scam is relevant to MAC cosmetic brand that was unveiled as worth $30 million. The aforementioned fraudulent attempts urge serious attention to the cosmetic industry to control dirty money proliferation. 

What is AML Compliance?

AML compliance is about the screening of customer details and business transactions for a protected financial system. It ensures anti-money laundering compliance mechanisms. Furthermore, AML procedures ensure the provision of AML solutions to mitigate crime rates and illicit money transfers from local fake accounts to foreign accounts. All the financial industries are heading to introduce actionable procedures to pacify dirty money gains. 

Cosmetic Industry As Safe Heaven for Money Launderers

With the rise in digitization, criminals are exploring different pathways to committing crimes. Regulatory bodies never showed that interest in framing regulatory laws in the cosmetic industry to detect illicit activities. The cosmetics sector is considered a safe industry for the commission of a crime. Top brands like MAC are found involved in laundering hefty amounts in form of cosmetic products. Cosmetic traders bypass AML systems using facilitators for their clandestine activities. Bloomberg reveals $2.3 billion fraud in the cosmetic industry. The fraud indicates the use of fake documents and details to get access to the big money deals using the cosmetic market. The lack of AML monitoring is the key cause of dirty money transfers which should be controlled on an effective basis. 

Why is AML Verification of the Cosmetic Industry is Mandatory? 

The cosmetic industry boom defines the real worth of the market that continues to rise with time. Cosmetics brands invest in the products first and low-quality material is used in the manufacturing process which is illegitimate. The cosmetic stock is traded out of the borders using forged identities or documents across the borders. The scenario insists on a potential AML screening process to get a wide berth of illegal money transfers. The rapidly growing market of cosmetics requires proper verification procedures to address financial frauds.

How to Incorporate AML Security in Cosmetics Industry? 

Technology is reshaping the whole world and every industry is becoming a part of the process. Artificial intelligence is playing a fundamental role in ensuring a robust verification process. The AI-enabled models are applied to the software specifically designed for the cosmetic industry to screen cosmetic products. Furthermore, brand-owners KYB, KYT & KYI is essential to using different AI-test cases for anti-money laundering actions. There is no doubt about the fatal consequences of money laundering for the financial market. No matter which industry is generating the revenue but the capital eventually becomes part of the financial system. 

Role of Regulatory Bodies for AML Solutions

AML regulatory bodies are functional around the world but financial policies continue to change according to the situation. FATF (Financial Action Task Force) regulations for cosmetics and relevant industries are quite strict. The 40 recommendations are specifically for curbing money laundering. According to an estimate, the cosmetics market’s total worth as of 2020 is recorded as USD 277.67 billion which is a record high. It indicates that AML compliance is necessary for seamless financing and AML procedures without AI integration would not be worth it. Regulating authorities need to pay attention to robust compliance procedures to overcome forgery and financial losses. 

Enhanced Due Diligence 

Every business domain requires AML/CFT compliance verification process to avoid financial theft. EDD is enhanced due diligence of the customers, especially for the politically exposed persons and sanctioned list of the people. 

Final Thoughts

Money launders are active around the globe and they have multiple ways to conceal their ill-gotten money. Technology is changing the dynamics of every industry. Fraudsters are fastly taking over the cosmetic market for nefarious designs. It is widely taken that scams in the cosmetic industry are quite convenient. Furthermore, a wide perception is that lack of compliance helps manipulators to affect the financial system. At the same time, the potential of customized AML Solutions is unbeatable for the mitigation of financial crimes.

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