ANTI-MONEY LAUNDERING
PRE-READING NOTE
Money Laundering is commonly referred to as the concept of concealing, relocating or seeking to retain the profits conducted from a crime. The European Communities Directive of March 1990 defines it as “the conversion or transfer of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from serious crime.”
Criminals benefit from the proceeds of the crime by usually initiating in complex money laundering schemes which more often than not, finance terrorism and large criminal organizations. However, under UK law money laundering can also encompass the simple ownership of the proceeds of criminal's own crime. The Proceeds of Crime Act 2002 (PoCA) identifies this to be “wide-ranging and encompasses mere possession of criminal or terrorist property as well as its acquisition, transfer, removal, use, conversion, concealment, or disguise”..
Many organizations in the finance sector, such as banks and accountants, are required to employ anti-laundering safeguards and implement secure systems in respect of money laundering. Reporting obligations are strictly set whereby firms must report suspicious activities to The Serious Organized Crime Agency (SOCA).
Money which is laundered by criminals worldwide is estimated to be the equivalent of 2-5% of the world's Growth Domestic Product (GDP) - an estimated £20 billion is laundered yearly in the UK alone. Whilst smaller criminal organisations deal in diminutive amounts of cash, the more serious criminals have a propensity to locate a safer place for the proceeds of their crime in another country, quite possibly a self-governing state, where there is less suspicion and more security for themselves. This safeguard arrangement is a renowned precaution for criminals to distance the proceeds of their crime from the crime itself.
“From the point of view of the criminal, it is no use making a large profit out of criminal activity if that profit cannot be put to use…putting the proceeds to use is not as simple as it may sound. Although a proportion of the proceeds of crime will be kept as capital for further criminal ventures, the sophisticated offender will wish to use the rest for other purposes…If this is done without running an unacceptable risk of detection, the money which represents the proceeds of the original crime must be "laundered"; put in an estate in which it appears to have an entirely respectable provenance”.
Subsequently, the UK government has implemented many instruments to prevent a criminal from abusing the UK's financial system and benefiting from the proceeds of crime. The UK law is of the first which requires any British citizen to provide an obligatory report to the authorities about not just the actual awareness that one is involved in a crime but a suspicion also. This signifies both, a moral and legal obligation for British citizens and indicates the importance of compulsory responsibility within the UK. However, despite this, it must be analysed how these changes have affected professionals within the private sector who have created an act by omission.
Prior to the PoCA 2002, there were separate offences for drug money laundering. These were outlined in the Criminal Justice Act 1988 (CJA) and Drug Trafficking Act 1994 (DTA). Under the DTA and CJA, it was problematic for the Crown as it sometimes had difficulties analyzing when charging under the appropriate Act the foundation of the criminal Proceeds. The 2002 Act has significantly amended all key money laundering offences and associated definitions. It will be examined how the PoCA has replaced the parallel offences with single offences to resolve confusion. Nonetheless, there have been many developments ever since. These comprise of the Serious Organized Crime and Police Act (SOCaPA) 2005, Terrorism Act (TA) 2006 and Fraud Act (FA) 2006. Furthermore, independent government bodies, such as the Financial Task Force on Money Laundering (FATF) and the Joint Money Laundering Steering Group (JMLSG), have been created to provide assistance for both, individuals and organizations in ensuring preventative measures are taken to help prevent money laundering
Money laundering is an emerging problem currently faced by all countries around the world, and whilst many changes have been introduced to prevent it, it can be seen from the evidence of this research that the rudiments of this misdemeanor remain is more or less still the same. Technology has provided, and will probably continue to provide a more intelligent and sophisticated ways to convert the proceeds of a crime into legal assets. It has been demonstrated that money laundering and its affiliation with organized crime are more often than not connected in one way or another. The massive takings that accumulate from such areas as drug trafficking, domestic fraud, VAT fraud, etc, are usually used to aid operations in progress and to create status and admiration for those in control of the criminal business.
The degree of intelligence and sophistication within organizations is a major concern due to the recent cases involved corrupt public servants and politicians. Though the law has vastly developed over the years, the fight against money laundering continues. An international effort continues through regulatory authorities, such as the introduction of the 40 (+9) Recommendations by the Financial Action Task Force (FATF).
The FATF has acknowledged four significant threats presented by money laundering activities. Firstly, simply failing to prevent laundering from happening makes it a lot easier for criminals to gain access to key information and profit from their illegitimate conduct. Secondly, this failure then allows criminal organizations to finance other criminal activities such as Terrorism. Thirdly, the accessibility of the financial system by launderers creates a risk for all institutions in the finance sector. Finally, the power and wealth of criminals which is derived by laundering can ultimately place the national economies and democratic systems under threat.
Thus, money laundering poses a threat to the UK's financial development, political integrity and steadiness of our country. The Bahamas is a primary example of dishonest investment resulting in the government being regarded as corrupt and the country's financial sector on a downfall. The stability of a countries economy relies on well-constructive preventative measures to prevent criminals from cheating the revenue into claiming millions. Loopholes still exist within the English legal system, and though we cannot close them due to innocent traders, other strategies can be introduced to prevent this, as demonstrated in the Bond House Decision.
Money laundering is carried out first and foremost through financial institutions and it is therefore crucial that preventative measures against money launderers are enacted in those sectors. The recent Money Laundering Regulations 2007 has rung alarms in all institutions dealing with finance and has tightened up security. Now, firms such as banks, accountants, solicitors, loan companies, mortgage companies and many more have had to undergo training to prevent money laundering. This does indicate that the government is taking this issue seriously but so are the perpetrators. However, investigations have discovered that money laundering exists within members of a talented criminal class, such as professional money launderers. These comprise of accountants, lawyers, bankers and many other practicing professionals. Most, such as Donald Mackenzie – a bank manager in a £21 million fraud case, are fascinated by enormous amounts of wealth and a celebrity lifestyle. This has been brought to the attention of the authorities and legislation has been enacted so that now no financial institution or professional will be protected from the provisions contained within the UK's legislation.
In order for this to happen effectively, we must amplify our efforts on identifying the proceeds of crime and preventing criminals from accessing the financial system. Only by using these methods will criminals and money launderers become more doubtful and find money laundering to be a risky activity and ultimately one seen to be not worth the risk. Professor Bill Gilmore (1993) states: "for the first time, to take co-ordinated and effective world-wide action to undermine the financial power of drug trafficking networks and other criminal organisations, is now in sight if not, as yet, fully within our reach".
However, there must be political assistance in helping the nation to cement together a strong well-constructed international operation, against the battle against money laundering.
ANTI-MONEY LAUNDERING
What is Money Laundering?
Definition
A basic definition of money laundering is that illicit funds from one source are deposited to another while the original source of the funds is hidden. The money then appears without fines, penalties, or legal restrictions elsewhere, through a series of transactions and becomes available for use in a legal setting.
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