The government the “Action Plan for Anti-Money Laundering and Counter Terrorist Finance’’ to stop the illicit movement of money and the illegal activities that such movement funds.
Government ministers want to strengthen law enforcement in this area by introducing new legal powers while making it easier for banks to target clients who are a high money laundering risk. They also want greater cooperation between organisations here and abroad and to develop closer links with those in the private sector most vulnerable to money laundering.
The aim is to reform the Suspicious Activity Reports (SAR) regime by October 2018 and put the Joint Money Laundering Intelligence Taskforce (JMLIT) on a permanent footing. These measures, it is hoped, will make it easier for the private sector to make SAR’s, encourage information sharing and complement plans for unexplained wealth orders; whereby people lose their assets if they cannot explain how they lawfully obtained them.
The Plan aims to strengthen business’ ability to identify, prevent and report money laundering. This will place added responsibility on everyone in business: they will be expected to show an improved awareness of suspicious finances and act accordingly.
In order to do this, business people will have to know how to recognise money laundering. So what is it? And what are the signs of it?
Money laundering involves the hiding or disguising of the origins of money so that it cannot be identified as the proceeds of crime. A person can launder their own criminal proceeds or have someone do it for them. Both of these are offences under the Proceeds of Crime Act 2002 (POCA): Section 327 makes it an offence to conceal, disguise, convert, transfer or remove criminal property from the jurisdiction, Section 328 makes it illegal to enter into or become concerned with an arrangement to acquire, retain or use the proceeds of crime and it is an offence, under Section 329, to possess criminal property.
Sections 330 to 332 make it an offence to fail to disclose any knowledge or suspicion of money laundering. Suspicion, in such cases, was defined in Da Silva (2006) as “a possibility, which is more than fanciful, that the relevant facts exist’’. The law, therefore, offers no scope for intended or unintended ignorance of money laundering. Checks have to be made by everyone in business.
Detailed, diligent checks must be made on the identity of a client, trading partner or anyone else with a connection to a company who wishes to move money around or out of that organisation. Failure to do so will lay people open to accusations that they failed to disclose knowledge or suspicion of money laundering. Similarly, failure to make adequate investigations to identify the real beneficiaries of a deal or the exact nature of a business relationship between two parties will also make it difficult to rebut allegations that you ignored the potential for money laundering. Money Laundering Regulations place a responsibility on people to make an “authorised disclosure’’ to the authorities if they have either the knowledge or the suspicion that we mentioned earlier regarding money laundering.
So what should we be looking for as potential indicators of money laundering? No list can be exhaustive as those involved are always looking for ways to disguise their activities.
But the following can be regarded as warning signs:
Suggestions that a deal should be shrouded in secrecy. A reluctance to disclose the exact amounts of money, investors in or reasons for a deal could all be viewed as money laundering indicators.
Unusual conditions or instructions being requested as part of a deal by one or more of the parties involved.
A firm being contacted out of the blue, with no apparent reason being given why the person making contact wants to trade with or invest in the company.
Sudden changes being requested to a working relationship. If funds are moved or removed without a proper announcement, if a source of funding suddenly changes, if a request is made to use a different account for no apparent reason or if a payment is then reversed without explanation, questions have to be asked.
Illogical deals being proposed. If a loss-making, unnecessary transaction is suggested, if payments are requested in cash for no clear reason, if assets appear suddenly or if a transaction appears overly large or complex, suspicions should be aroused.
Some business people may feel out of their depth either looking for the signs of money laundering or taking preventative action. If this is the case, it is worth noting that firms such as Rahman Ravelli regularly analyse companies’ vulnerability to money laundering and then devise prevention procedures.
Business people must have procedures in place to make it as hard as possible for money laundering to function within their company.
A no-cash policy on transactions of a certain size can reduce the potential for money laundering. Appointing senior staff to scrutinise the source of funding for deals or investment – or devising a procedure for third parties to disclose funding sources – will go some way to deterring money laundering; especially if such wealth is being brought from countries with a weak record on preventing it. Rules regarding the use of and access to company accounts will also minimise the chances of a company becoming a vehicle for wrongdoing.
The Action Plan wants to makes it easier to beat the money launderers and make SARS more effective. But companies have to take the initiative themselves. A SAR simply involves submitting the relevant information online to the National Crime Agency (NCA). The challenge is to make sure you are aware of the need to do this when you should be doing it.