What is Money Laundering?
Money Laundering is the process of illegally ‘cleaning’ large amounts of ‘dirty’ money through a legitimate business. Anti-money laundering (AML) are controls in place to prevent money laundering.
The process of laundering money typically involves three steps: placement, layering, and integration.
What are Examples of Money Laundering?
For example, money from drug trafficking being processed through a business front to explain where the money came from.
Money laundering used to be defined using actual physical money or financial transactions however, that is no longer the case. For example, in the UK economic goods can also be laundered.
What AML Legislation is in Place?
There are several primary pieces of legislation in place in the UK to prevent and deter this illegal process. The UK anti-money laundering regime requirements are set out in:
- Sanctions and Anti-money laundering Act 2018
- Criminal Finances Act 2017
- Proceeds of Crime Act 2002 (POCA)
- Serious Organised Crime and Police Act 2005
- Terrorism Act 2000
- Anti-Terrorism Act, Crime and Security 2001
- Money Laundering, Terrorist Financing and Transfer of Funds (Information of the Payer) Regulations 2017
- The most recent and up to date piece of legislation on Anti-Money Laundering (‘AML’) in the UK is The Money Laundering and Terrorist Financing Regulations 2019
What Businesses Have to Have Anti-Money Laundering In Place?
A business may need to be monitored by Money Laundering Regulations for many reasons, depending on the type of business, will depend on whether these regulations automatically apply or need to be registered for.
The regulations apply to many business sectors, some include:
- Financial and credit businesses.
- Independent legal professionals.
- Accountants, tax advisers
- trust and company service providers.
- estate agents.
The above list is not exhaustive.
Why Is It Illegal and What Are The Consequences?
Money laundering regulations were designed to protect the financial system in the UK.
According to the National Crime Agency in 2019, serious organised crime cost the UK economy £37 billion through 4542 known groups operating in the UK.
As such if a business is covered by the above regulations/legislation, then controls are put in place to prevent the business from it being used for money laundering purposes.
An anti-money laundering breach is the failure to comply with anti-money laundering laws and regulations that have very serious consequences.
Therefore, the consequences depend on the outcome of investigations done. However, these include:
- Criminal proceedings with sentences of up to 14 years
- Damaged reputations of a business
The government, HM Revenue and customs and the police are the principal bodies investigating money laundering offences within the UK.
The prosecution that provides consequences of the outcome of the investigation is the Crown Prosecution services.
The Serious Fraud Office investigates and prosecutes serious or complex frauds or corruptions and The Financial Conduct Authority provides investigation and prosecution on matters that involve financial firms.
This includes a failure to comply and meet obligations under regulations.
As a result, offences under the Regulations are punishable with a maximum penalty of two years imprisonment (for individuals) and an unlimited fine.
What Are Some Examples of Money Laundering In Recent Years In The UK?
In September 2019, 4 people were sentenced by Southwark Crown Court for enacting the UK’s biggest visa and immigration fraud case.
The sentenced impersonated immigration advisors and charged fees for accumulating false immigration applications. However, had the scam had been successful it would have cost the UK taxpayers millions of pounds.
Another example of money laundering happened in 2019 by the Standard Chartered Bank.
Worst of all, there were a series of failings by the bank including opening a bank account with 3 million UEA Dirham equivalent to half a million GBP.
The cash was deposited from a suitcase. Therefore, the FCA issued the bank with its second-largest fine of £102 million because the bank failed to comply with identifying and reporting possible money laundering activities.
Please see our article on OPBAS.