Aziz Rahman

With money laundering becoming an increasingly important issue for law enforcement agencies, Aziz Rahman of business crime solicitors Rahman Ravelli outlines how it can be prevented.

For many, money laundering conjures up various mental images and preconceived ideas. But individuals and companies would be better abandoning those and considering the real risks it can pose.

It is true that the laundering of money can involve huge sums being moved across continents. There has, after all, been £12.6bn in fines imposed on European banks for money laundering failings between 2012 and 2018. But money laundering is not confined to the big banks and big business.

While there are money laundering regulations that apply specifically to what is called the regulated sector - banks, insurance companies, investment firms and other organisations handling large amounts of money – the authorities are increasingly determined to punish money laundering wherever it is discovered.

The UK’s Financial Conduct Authority (FCA) has put tackling money laundering across all business sectors at the top of its agenda and the UK government has been consulting extensively on how to incorporate the European Union’s Fifth Money Laundering Directive into law. It is brave or foolish for those in business not to take the time to know the risks of money laundering.

Defining and identifying money laundering

Money laundering is the disguising of money gained from criminal behaviour. This is done by putting that money through a legitimate company and then taking it back out. As I said, money laundering does not just involve major corporations and banks and span continents – a UK charity administrator was recently sentenced to ten years’ imprisonment for using charity accounts to launder what he gained from selling counterfeit medication.

It is an offence in the UK under the Proceeds of Crime Act 2002 (POCA): Section 327 makes it an offence to conceal, disguise, convert, transfer or remove money or other assets derived from crime. Section 328 makes it illegal to arrange to acquire, retain or use such assets, while Section 329 makes it an offence to possess them. Fines can be imposed on individuals or companies and a person found guilty of such an offence can be jailed for up to 14 years.

This is why turning a blind eye to money laundering cannot be considered an option – just ask any of those banks who had to pay those billions in fines.

If you or your company are accused of money laundering it may not necessarily end in a prosecution. That may also be the case if it is found that someone has used your company as a vehicle for money laundering, as those looking to commit it will be looking to do so without drawing any attention to it. But how favourable the authorities treat you and/or your company may well depend on what genuine efforts had been taken to prevent it being committed. If it can be demonstrated that properly thought-out precautions were in place to identify and prevent the risks of money laundering, more lenient treatment is likely.

The value of precautions

The risk money laundering poses may vary from business sector to sector and even from business to business within any given sector. Specialist legal advice can be taken on what precautions should be taken in relation to how you do business.

But, in the most general terms, businesses should be:

  • Checking the identity and background of each client, associate or other person looking to trade with it in any capacity.
  • Examining the behaviour (and the reasons for such behaviour) of individuals seeking to move money or other assets in or out of the business.
  • Establishing every party and beneficiary in a deal, along with the precise sources of funding and the relationships between all parties involved.
  • Devising and introducing procedures to prevent money laundering. Limits on the size of cash-only deals, restrictions on access to company banking facilities and procedures for staff or other individuals to report suspicions can be worthwhile.

Introducing such measures may deter many money launderers and make it easier to identify laundering if it is committed. Importantly, they will also indicate to the authorities that there was a genuine effort being made to prevent laundering by looking for any signs of it.

While indicators of it will differ with each situation, there should be suspicions if:

  • Someone in a deal is vague about the exact amounts of money, the people or the activities involved.
  • Unusual conditions or arrangements are suggested as part of a deal; such as demands for a cash-only transaction or for assets to be moved for no apparent reason.
  • A business is asked out of the blue to take part in a deal by someone it has had no prior dealings with.

For the money launderer, business can present opportunities. It is up to those in business to restrict those opportunities.

Aziz Rahman is founder of Rahman Ravelli; a top-ranked business crime law firm in national and international legal guides.

Ashleigh Smith
Article by Ashleigh Smith
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