Hedge Funds and Money Laundering
Money laundering is a heinous crime. Although it does not directly lead to loss of human lives, it allows money to reach the hands of wrong individuals. The proceeds from money laundering end up in the hands of gangsters, warlords, drug dealers and terror groups. No financial institutions would want to enable such transactions. However, many times hedge funds unwittingly become part of such transactions. In this article, we will understand how hedge funds can identify and avoid dealing with money launderers.
Hedge funds are requested to take a declaration from their clients verifying that the money being invested has not been realized as a result of criminal or illegal activities. Also, hedge funds are required to ask their customers to give a declaration that their name does not feature on the list of high risk investors. In case their name appears on such a list, hedge funds are instructed to not accept money from them.
Symptoms of An Investor Being Engaged in Money Laundering
Hedge funds must therefore be very careful as to whom they accept money from. Failure to know the background of their customers is likely to get these funds involved in major legal hassles. Although, they are free from most regulations, they still have to be careful to not be part to felonies like money laundering.
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