Anti-money laundering legislation is a set of laws designed to stop criminals from disguising illegally obtained funds as legitimate income. As a freelancer, you play a part in this system.
What is Anti-money laundering legislation?
Anti-money laundering legislation, often called AML, refers to the laws and regulations that require financial institutions and certain businesses to prevent, detect, and report money laundering activities. Its core purpose is to stop criminals from 'cleaning' money obtained through illegal acts so it appears legal.
Why is this important?
It's important because you, as a freelancer, can be an unwitting part of the financial system criminals exploit. If you accept large, suspicious payments without question, you could inadvertently facilitate crime. Platforms you use are legally required to have AML checks, which affects how you get paid.
How does it work?
In practice, AML works through processes like Know Your Customer checks, where a platform verifies your and your client's identity. It also involves monitoring transactions for red flags, such as unusually large payments or complex payment structures, and reporting suspicious activity to authorities.
Pros and cons
The main pros are a safer financial system and reduced risk of you handling illicit funds. The cons include more paperwork, potential delays in payment processing, and sometimes intrusive requests for personal financial information to verify your business.
Conclusion
Understanding AML helps you see why financial platforms ask for verification details. It's a necessary part of modern business that protects everyone. By being cooperative and vigilant with your own client relationships, you contribute to a more secure freelance economy.
Ready to freelance?
Download the HFS Freelancers app and discover flexible shifts in your area. Or explore more terms in our knowledge base.
