What is Money Laundering?
Money laundering is a criminal process of changing the illegal source of property to make it appear legitimate. It normally involves the introduction of illegally gained property into the financial system under the guise of a legitimate company’s assets. These assets, which can include many different forms of property including money, land, buildings, technology and intellectual property, may then be used as part of a legitimate business operation.
Money Laundering Offences
In the UK, money laundering is primarily regulated under the Proceeds of Crime Act (POCA) 2002 and the Money Laundering Regulations.
The EU is also in the process of introducing new rules to update the anti-money laundering directive, which is likely to include a requirement for all EU countries to put in place new central registers listing information on the ultimate beneficial owners of companies.
There are three main money laundering offences under the POCA:
- concealing, disguising, converting, transferring or removing criminal property;
- entering into or being involved in an arrangement that facilitates the acquisition, retention, use or control of criminal property;
- the acquisition, use and possession of criminal property.
The alleged offender must know or suspect that the property constitutes or represents a direct or indirect benefit, in whole or part, from criminal conduct. However, an offence will not be committed if an authorised disclosure is made before money laundering occurs.
The National Crime Agency (NCA) is primarily responsible for collecting intelligence on money laundering and prosecuting money laundering offences. If someone is found guilty of a money laundering offence, they can be imprisoned for up to 14 years or fined, or both.
Reporting Money Laundering and Anti-Money Laundering Obligations
Under the POCA it is also a criminal offence to fail to disclose money laundering offences in the course of business under the suspicious activity reports system, or to fail to disclose a suspicious activity report (SAR) to the NCA’s UK Financial Intelligence Unit (UKFIU) when it has been made. It is also an offence to let a customer or third party know that their activities have been reported.
The offences relating to the failure to report suspected money laundering, as well as the three main offences listed above, also apply to property that is likely to be used for the purposes of terrorism.
Anti-money laundering obligations are also imposed on regulated financial businesses through the Money Laundering Regulations. These apply to a variety of businesses and professionals, including financial institutions, credit organisations, accountants, lawyers, estate agents, trust or company service providers and casinos, and include the duty to:
- perform customer due diligence throughout the business relationship;
- keep records on the identity of customers for five years; and,
- to have policies and procedures in place to identify unusual activity or high risk situations.
It is one of the roles of the FCA to regulate and supervise compliance with these anti-money laundering obligations, and they will take enforcement action if non-compliance is found.