Defending businesses against money launderers

Aziz Rahman of award-winning business crime solicitors Rahman Ravelli explains why everyone in business has to be aware of the dangers of money laundering – and take steps to prevent it.

When the bank Standard Chartered was recently ordered to pay £102m by the Financial Conduct Authority for its anti-money laundering failures it made plenty of headlines.

Yet the fine was hardly ground-breaking. From 2012 to 2018, European banks had to pay more than £12.6 billion in fines for facilitating money laundering, weaknesses in their money laundering controls and sanctions breaches.

But, despite these huge figures, money laundering is a danger to everyone in business. Banks are not the only targets of those looking to make their proceeds of crime appear respectable – and the authorities’ activities are reflecting this.

The UK’s Financial Conduct Authority (FCA) has made it clear that it is taking an increasingly tough approach to tackling money laundering across all business sectors. The UK government has just ended its consultation into how the European Union’s Fifth Money Laundering Directive should be incorporated into UK law – a move that will extend the scope of previous EU efforts to tackle money laundering.

There are money laundering regulations that apply specifically to what is called the regulated sector: banks, insurance companies, investment firms and other organisations that regularly handle large amounts of money. But the authorities are looking to identify and punish money laundering wherever they find it – meaning that everyone in business needs to know what it is and the dangers it poses.

The Definition of Money Laundering

Money laundering, the disguising of money gained from criminal behaviour, involves someone putting that money through a legitimate company and then taking it back out.

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.

Putting it in its simplest terms, nobody in business can afford to turn a blind eye to money laundering or any suggestion of it. If you or your company are accused of money laundering or you discover that someone has used your business to commit it, you will not necessarily be prosecuted. But that may depend on what efforts you had taken to prevent it being committed. More lenient treatment is likely if you can demonstrate that you had taken all possible precautions.

Taking Precautions

It is always possible to seek detailed, expert legal advice on what precautions should be taken with specific regard to your business and money laundering.

But generally speaking, businesses should be:

* Checking in detail the identity and background of each client, business associate or any other person looking to trade with it or embark on any kind of relationship with it.

* Analysing the conduct and motivation of anyone wanting to move money or other assets in or out of the business.

* Ensuring all the parties in a deal are known, along with all the beneficiaries, the exact sources of funding and the relationships between everyone involved.

* Introducing procedures to reduce the risk of money laundering. Imposing limits on the size of cash-only deals, restricting access to company banking facilities and introducing ways for staff or trading partners to report suspicions can all be of value.

Such measures will be no guarantee that money launderers will not target a business. But they will deter many money launderers, will make it far easier to identify laundering if it does happen and will show to the authorities that everything possible was done to prevent it.

Indicators of money laundering may differ from trade sector to trade sector and even between businesses in the same sector.

But suspicions should arise if:

* Someone in a deal is vague or reluctant to disclose details about the exact amounts of money, the people and the activities involved.

* Unusual conditions or arrangements are included in a deal.

* A business is suddenly asked to be involved in a deal by someone who has never previously traded with it.

* Demands are made for a deal to be done in cash or involve unexplained movements of assets.

The scale of money laundering has been shown clearly by the failings of many banks. But this is a problem that everyone in business needs to tackle.

 

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

www.rahmanravelli.co.uk

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