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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

Understanding Anti-Money Laundering Investigations: A Comprehensive Guide

Author: Azizur Rahman  14 May 2013
5 min read

The European Union is looking to fight back against money laundering. But what does that mean for anyone who comes under investigation?

Sometimes the figures speak for themselves. And in the case of the European Union’s (EU) proposals to tackle money laundering, they seem to be speaking rather loudly.

Five million euros. That’s the maximum fine now being created for individuals who flout the anti-money laundering rules being proposed in a bill by the European Commission (EC).

10% of turnover. That is what firms, such as banks, could have taken off them for defying the same rules.

1.2 trillion euros. That is the EC’s estimate of annual money laundering activity worldwide.

The practice of money laundering, the EC argues, is a risk to the stability of the financial system. As a result, the bill put out last month in Strasbourg does not pull its punches in its attempts to deal a knockout blow to the money launderers. “Dirty money has no place in our economy,’’ stated EU Commissioner for Home Affairs Cecilia Malmstrom; who was one of the bill’s sponsors. “Whether it comes from drug deals, the illegal guns trade or trafficking in human beings, we must make sure that organised crime cannot launder its funds through the banking system or the gambling sector. To protect the legal economy, especially in times of crisis, there must be no legal loopholes for organised crime or terrorists to slip through. Our banks should never function as laundromats for mafia money, or enable the funding of terrorism."

Commissioner Malmstrom’s strong words do seem to be backed up by action. The bill includes sanctions against offenders varying from the withdrawal of bank licences to preventing executives from taking places on company boards and the public naming and shaming of those involved in money laundering.

According to the bill, every company will have to hold genuine, reliable information on its ultimate owner – information that must be handed over if and when an investigation commences into the company’s activities. Traders in high value items, such as diamonds or furs, should make background checks on customers making cash purchases of more than 7,500 euros and report any transactions that appear suspicious. Casinos, both real and online, will be obliged to make checks on transactions of 2,000 euros or more. The EC is also calling on EU countries to create what it calls financial intelligence units to make the exchange of information from country to country easier, thus assisting with investigations that cross borders; as if often the case with money laundering.

Recent events may seem to indicate that the EU is right to take such an approach; even if it is its third attempt in eight years to tighten up such standards. News coverage of some of HSBC bank’s questionable activities and Standard Chartered Bank’s involvement in illegal Iranian transactions worth billions of dollars show that the issue of money laundering is a live one. Over the next two years, the final form of the bill will be negotiated. Some have claimed it does not go far enough and contains glaring loopholes while others argue that it will lead to greater transparency in company ownership that will usher in an era of cleaner, more open trading. But what will be most crucial is how energetically it is enforced. Only that will determine if the bill hits the targets it seems to be aimed at.

 The bill is still some way from being law. And it will be a white elephant unless countries make a conscious decision to enforce it if and when it becomes law. After all, previous EU legislation has called on banks, lawyers, accountants and estate agents to file suspicious transaction reports (STR’s) to the authorities, with varying degrees of success from country to country. Yet, if the comments being made are to be taken at face value, there seems to be a will to make this bill succeed. The negative reaction surrounding it is based on the view that it is not strong enough or as comprehensive as it should be: rather than the MEP’s from member states complaining that they don’t want or need the bill, they are saying it is not going far enough. In such a climate, it seems that the bill has enough political will to become an effective piece of legislation.

So what will it mean for individuals and companies that are affected by the provisions of the bill? First and foremost, the issue of compliance is a vital one. As mentioned earlier, the requirements that the bill places on individuals and companies look set to be extensive. Individuals and companies face the responsibility of making sure they are fully compliant with the bill when it comes into effect. The penalties for not being so, as we have mentioned, look set to be very severe indeed.

Making sure they are fully compliant is likely to require the assistance of specialist legal advice. There appears no other way of making sure each and very provision of the bill is complied with. Going to the time, trouble and expense of seeking such legal assistance may well seem a chore. But can it be any worse than leaving yourself or your company open to the kind of penalties that the bill aims to introduce? Legal advice could also have an up side – it may actually be able to give genuine reassurance to a company that incorrectly fears that it is in breach of the bill. This is probably most likely regarding issues of shared ownership. The bill currently stipulates that only ownership of 25% or more of a company need be declared. It also does not have any specific provisions regarding “bearer shares’’ – documents in which company ownership is conferred on the person possessing them.

The right legal advice will be all important for companies affected by the bill. Money laundering is something that has been increasingly in the spotlight over the past decade and this EU bill is just the latest development. In the UK, the Serious and Organised Crime Agency (SOCA) was created seven years ago and has its own Financial Intelligence Unit to look at what the EU bill is focussing on. Later this year, SOCA will become part of the newly-formed National Crime Agency, which will then be the UK organisation tackling money laundering using existing UK and EU legislation.

The 2002 Proceeds of Crime Act (POCA) created three offences in relation to money laundering, with penalties of up to 14 years’ imprisonment. Added to that, POCA allowed the authorities to confiscate the proceeds of crime via civil recovery. This made money laundering an occupation that not only carried great punishments but also the risk that any ill gotten gains could be taken from the alleged perpetrator without even the need for a criminal conviction. In such circumstances, the right legal advice is once more essential when it comes to mounting a strong, proactive defence against allegations of money laundering. At Rahman Ravelli, we regularly represent clients who are either facing the loss of their property under the civil recovery provisions of POCA or about to be prosecuted for money laundering under the same Act. But we also carry out compliance work for all; manner of companies who use our services to make sure they are complying with all aspects of the law.

With the EU looking more determined than ever to tackle money laundering, now is certainly a good time to make sure your business is legally compliant. Only then can you be certain your business dealings are whiter than white.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

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