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Understanding Anti-Money Laundering Investigations: A Detailed Guide

Author: Azizur Rahman  13 March 2013
4 min read

The Vatican has found itself in an unenviable position due to suspicions of money laundering. But what exactly is money laundering? How can someone defend themselves when accused of it? And what can be done to prevent it?

Money laundering and the problems it can cause do not respect status. The people who carry it out can come from all walks of life and it can cause problems for anyone who becomes embroiled in it. It can affect the loftiest and the lowliest. Or, as has been seen at the Vatican recently, even the holiest.

The spiritual base of the Roman Catholic Church has been in the spotlight recently for, of all things, problems associated with money laundering.

At the start of this year, Italian banking officials suspended bank-card transactions at the Vatican due to questions surrounding the Vatican bank’s involvement in a money-laundering case dating from three years ago. In effect, this put the Vatican on a “cash-only’’  basis - hardly the most dignified trading position for such a pious organisation. It left church officials trying desperately to find some method for processing bank card transactions involving thousands of tourists who descended on the Vatican to take in the sights and spend their money.

This bizarre scenario arose because prosecutors in Rome were reportedly examining the role of the Vatican bank - the Institute for Works of Religion (IOR) - in the old money-laundering case. The Vatican has introduced financial reforms in the past year to try and ensure it meets tough, new European banking standards and protects itself against money laundering. As the crisis broke last month, a Vatican spokesman insisted that the Vatican had introduced the EU-required controls for “vigilance, prevention and fighting money laundering’’. But in response to this, the Bank of Italy acknowledged that while the IOR had become more transparent financially “the presence of an effective anti-money laundering regime had still not been proved’’. The IOR is being investigated by Italian magistrates looking into money laundering and last year’s report into it by Moneyval – an arm of the Council of Europe – was critical of its management; going as far as to say that “fit and proper criteria’’ should be applied to senior personnel at the bank as it currently lacked independent supervision.

The Vatican has struggled to portray itself as an honest banker since allegations linking it to money laundering, Freemasons and the Mafia emerged in the 1980’s due to the banker Roberto Calvi. Calvi, known as “God’s banker’’, was found hanged under London’s Blackfriars Bridge after the collapse of his Banco Ambrosiano.

Money laundering is the cleaning of money. In other words, the disguising of its origins so it cannot be traced back to criminal activity. It can vary from straightforward disguising of criminal proceeds right through to in-depth, complex arrangements involving a string of companies and banking facilities in various countries. Prosecutors investigate either self-laundering – where a person launders the proceeds of their own criminality – or cases where a person launders money on behalf of another person. Under the Proceeds of Crime Act 2002 (POCA), there are three offences of money laundering, punishable by up to 14 years’ imprisonment. Section 327 of POCA makes it an offence to conceal, disguise, convert or transfer criminal property or remove it from the jurisdiction. This is the section with most relevance for prosecutors in self-laundering cases. S.328 makes it an offence to enter into (or become concerned in an arrangement to) facilitate the acquisition, retention, use or control of property by or on behalf of another person, knowing or suspecting that the property is criminal property. Under S.329, it is an offence to acquire, use or have possession of criminal property.

POCA provides exceptions to all three of the above charges, whereby the person concerned can make an “authorised disclosure’’ to the authorities regarding what they know about the possibly criminal origins of what has come into their possession. This is to give banks and other institutions the chance to alert the police or other investigators of their suspicions that a criminal is using them to launder the proceeds of crime. While such a facility allows banks to protect themselves from prosecution for laundering a criminal’s cash it also places a responsibility on them to flag up any suspicion that a person’s assets are derived from criminality. A failure to do so will lay them open to prosecution, with prosecutors then looking to build a case to prove that the alleged launderer knew or suspected that what they were handling were the proceeds of crime.

Such an attempt by prosecutors can lead to them compiling a case of what, on first glance, may appear very convincing evidence against an alleged launderer. But this is where a defence lawyer can truly earn their fee – the ability to prove that the defendant did not suspect they were involved in money laundering. Prosecutors can provide large amounts of circumstantial evidence but this can be contested with the aim of proving that the defendant either did not or could not know or suspect that the assets being handled were the proceeds of criminality. It is not enough for the prosecution to be able to prove that a defendant had a vague feeling of unease about what was happening. A jury will not be allowed to infer things from or speculate on circumstantial evidence. If, therefore, you find yourself facing money laundering allegations it is essential that your legal team can not only rebut anything implied by the prosecution  – the team must also be able to mount a strong, pro-active case that ensures the defence is on the front foot rather than merely responding to prosecution tactics.

The notion of criminal property is at the crux of money laundering offences. Were the assets in question the direct or indirect proceeds of criminal activity? And did the defendant know, or at least suspect, this? In many cases, the money laundering accusation will be a secondary charge to the principal offence. For example, the main charges may relate to drug dealing, with the money laundering of the alleged proceeds being a secondary charge. If the prosecution can prove the main charge, it will make it easier for them to then succeed in seeking conviction for the money laundering allegation. But if the situation is not quite so clear cut and there is no principal offence being alleged, then much of a defence team’s case could be based on experts. Forensic accountants, auditors or administrators will have the knowledge, expertise and ability to explain to a court just why a particular person or their business has a cash flow that has aroused the suspicions of the authorities. The prudent use of such expertise by the defence – coupled with a comprehensive, successful attempt to gain full disclosure of all relevant documentation and information - can help make the prosecution’s accusations appear speculative and rooted in presumption rather than fact. This is just the right approach when it comes to casting doubt on a case that has come to court.

Such practical assistance may not have the spiritual nature of a “higher power’’. But, as the Vatican has found out, it may well be far more appropriate in such circumstances.

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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