Legislation on money laundering is complex and is renowned for its strict rules and regulations. Companies and individuals can be caught up in money laundering unknowingly as offences can be committed not only where a person has knowledge of money laundering, but also where they merely suspect it.
Our team offers unrivalled advice to clients on all the key pieces of UK legislation which govern money laundering, namely the Proceeds of Crime Act 2002 (POCA) and the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017).
Proceeds of Crime Act 2002
Money laundering is the process by which the proceeds of crime or the ownership of criminal proceeds are changed so that the proceeds appear to have come from a legitimate source. The principal money laundering offences involve the concealment, disguise, conversion, transfer or removal of criminal property, or becoming involved in the arrangement of money laundering, or acquiring, using or possessing criminal property.
Typically there are three stages of money laundering:
- Placement – This is when illegally made money (“dirty money”) is disguised by being placed into a legitimate financial system, such as an off-shore account.
- Layering – This is when someone creates a complex web of transactions to move dirty money within the financial system, usually via various off-shore accounts. This makes it difficult for authorities to detect as the criminal strategically moves the money around to cover the trail of where the money originally came from.
- Integration – The dirty money is then absorbed into the economy through a legitimate transaction to create a plausible explanation for where the money came from. The criminal can now use the dirty money because it appears to have come from a legal source.
It is increasingly common for prosecutors to consider charging money laundering offences alongside, or even instead, of substantive offences. Money laundering is punishable up to a maximum of 14 years imprisonment. The size of the maximum sentence is indicative of the importance that the government places on combating money laundering.
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
Certain kinds of regulated businesses must put measures in place to help prevent money laundering. Businesses also have to report any suspicious activity in a Suspicious Activity Report to the National Crime Agency (NCA).
All professionals that operate in the regulated sector are obliged to disclose information about a transaction that they know, suspect or should reasonably have known or suspected, involves money laundering.
A failure to comply with this is a criminal offence and is punishable to a maximum of five years imprisonment. The most common defence to this allegation is that the information came to a professional legal adviser and in privileged circumstances. This is a complex area of law that requires specialist legal advice.
Tipping off occurs if the alleged offender discloses to a third party that Suspicious Activity Report (SAR) has been made by any person to the police, HMRC, the National Crime Agency (NCA) or a nominated officer, if that disclosure may prejudice any investigation that may be carried out as a result of the SAR.