Some people may think it means actually cleaning money and hanging it up on the clothes line to dry. It’s not. But it is cleaning cash in the non-literal sense.
You don’t need a washing machine to do it and simply put, it is illegal. Money laundering is the generic term used to describe the process where criminals disguise where money has come from. Typically, the money has come from criminal activities such as drug dealing, illegal investments or other underground financial dealings.
Criminals then disguise the original ownership and control the proceeds of criminal activities by making the money seem to have come from a legitimate source.
There are many different ways that money is laundered, and often it goes completely undetected through legitimate financial institutions. Sometimes even small businesses can be inadvertently cleaning money from criminal activities.
The basic money laundering process comprises of three steps:
1. Placement – The criminal puts the money into a legitimate financial institution i.e. a bank. This is usually done as cash deposits and is the riskiest part of the whole process as large amounts of cash are pretty conspicuous and can raise questions. Banks are required to report high-value transactions.
2. Layering – This involves sending the money through various financial transactions to change its form and make it difficult to follow. This may consist of several bank-to-bank transfers, splitting money up into many different bank accounts. The more there are the harder the money is to trace. It is likely to involve accounts in different countries making it even harder to track. Sometimes the money is used to purchase high value items such as houses, boats, cars or even diamonds. It is the hardest part of the money laundering process, and it’s all about making the original money virtually impossible to trace.
3. Integration – At this stage the money re-enters the mainstream economy in a legitimate-looking way, taking the form of a legal transaction. It could involve a final bank transfer to a local business is which the criminal is “investing” in exchange for a cut of the profits, or it could be the sale of a yacht bought during the layering stage. It could also be a purchase of something from the launderers own business passed off as a legitimate business expense. At this point the criminals can use the money without getting caught.
In the UK there are businesses that must be monitored by a number of authorities under Money Laundering Regulations. These are businesses that are most likely to be used to clean dirty money. These include:
• Independent legal professionals
• Tax advisers
• Insolvency practitioners
• Estate agents
• Financial and credit businesses e.g. currency exchange offices, cheque cashers or money transmitters
There is more information available at gov.uk so you can find out if your business needs to register. It’s best to check just in case. If your business falls into one of the regulated categories you must report any suspicious activity to the National Crime Agency (NCA) via the Suspicious Activity Reports System Regime (SARs).
If you suspect money laundering is taking place, or think something untoward is going on, you must report it and get legal advice straight away from a solicitor that specialises in money laundering.
What are the Penalties for Money Laundering?
Failing to report suspicions of money laundering can result in fines and, in some cases, a prison sentence. The actual crime of money laundering falls under a few different sections of the Proceeds of Crime Act 2002 and includes the offences of concealing criminal property, acquisition, use and possession of criminal property, and up to seven other offences. If convicted, criminals can face up to 14 years in jail.
Slater and Gordon Lawyers are recognised as market leaders in the field of fraud and white collar crime and have represented clients including companies, professionals, senior business executives and other individuals in numerous money laundering cases.
Contact us for a free initial consultation on freephone 0800 916 9054 or contact us online and we will call you.