What is Money Laundering – apart from being big business?

• Defined very widely in the UK. Incudes all forms of using or possessing criminal property (as well as facilitating the use or possession) regardless of how it was obtained.
• Criminal property may take any form including:
  1. Money or money’s worth
  2. Securities
  3. A reduction in a liability and
  4. Tangible or intangible property
• Money laundering (ML) can involve the proceeds of offending in the UK but also of conduct overseas that would have been an offence had it taken place in the UK. Money laundering also includes terrorist financing. There is no de minimis exceptions to money laundering or terrorist financing (MLTF).
• ML activity can include:-
  1. A single act (eg possessing the proceeds of one’s own crime)
  2. Complex and sophisticated schemes involving multiple parties
  3. Multiple methods of handling and transferring criminal property or
  4. Concealing criminal property or entering into arrangements to assist others to conceal criminal property.
• Businesses need to be alert to the risks posed by:-
  1. Clients/customers
  2. Suppliers
  3. Employees and
  4. The customers, suppliers, employees and associates of clients

(Neither CBS nor its customer needs to have been party to ML for a reporting obligation to arise – see later)

In summary, ML is the process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the ‘clean’ money to the launderer in an obscure and indirect way.

The United Nations Office on Drugs and Crime estimates that the amount of money laundered globally is 2 – 5% of global GDP or $800 – $2tn per annum in current US dollars.

What is the UK legal and regulatory framework?

• Primary ML offences are defined by Proceeds of Crime Act 2002 (POCA) as amended by Serious Organised Crime and Police Act 2008 (SOCPA). Inside or outside the regulated sector someone commits a ML offence if they:-
  1. conceal, disguise, convert, transfer or remove criminal property from England, Wales, Scotland or Northern Ireland
  2. enter into, or become involved in, an arrangement which they know or suspect facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person.
  3. Acquire, use or possess criminal property for which adequate consideration was not provided
• None of these offences is committed if:-
  1. The persons involved did not know or suspect that they were dealing with the proceeds of crime, or
  2. There is a reasonable excuse for not reporting (very rare for example in terms of personal safety or security), or
  3. The conduct which gave rise to the criminal property is reasonably believed to have happened outside the UK and had it been committed in the UK would have carried a maximum prison sentence of 12 months (very complex and onerous requirements to be complied with).

What are the responsibilities of a business?

• Businesses must have systems in place and controls capable of
  1. Assessing the risk associated with a client/customer,
  2. Performing CDD
  3. Monitoring existing clients
  4. Keeping appropriate records – both financial and non-financial and
  5. Entailing staff to make an internal SAR
  6. Relevant employees must be trained appropriately so that they understand both their own AML obligations and the business wide systems and controls that have been developed to prevent MLTF
  7. The AML skills, knowledge, expertise, conduct and integrity of relevant employees must be assessed.
  8. Effective internal risk management systems and controls must be established and the relevant senior management responsibilities clearly defined.