Money laundering

From CrimeLine from Andrew Keogh

Money laundering as a crime

Money Laundering is a crime which is considered to be so serious that its control has allowed the almost unprecedented infringment of civil liberties.

Recent legislation on money laundering is to be found in Part 7 of the Proceeds of Crime Act 2002 (POCA 2002), as amended by the
Serious Organised Crime and Police Act 2005, and the Money Laundering Regulations 2003.

Both POCA 2002 and MLR 2003 have been amended by The Proceeds of Crime Act 2002 and Money Laundering Regulations 2003 (Amendment) Order 2006.

With effect from 15 December 2007 the Money Laundering Regulations 2003 are replaced by the Money Laundering Regulations 2007 as a consequence of the EU Third Money Laundering Directive.

The National Criminal Intelligence Service, NCIS, has produced a "money laundering threat assessment". The Association of Chief Police Officers and the Crown Prosecution Service have produced a service level agreement that deals with the investigation, preservation of assets, obtaining and enforcement of confiscation orders and confiscation matters generally.

Following the implementation of the Serious Organised Crime and Police Act 2005, the National Criminal Intelligence Service has been replaced by the Serious Organised Crime Agency SOCA.

What is money laundering?

Money laundering is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises. It was first criminalised in the United Kingdom in respect of the proceeds of drug trafficking, by means of an offence in the Drug Trafficking Offences Act 1986. Further drug money laundering offences were subsequently enacted, together with separate offences relating to the proceeds of other criminal conduct and terrorist funds. At the time of introduction of the Act, there are five sets of money laundering offences in force, each applying to a different range of predicate offences and/or jurisdictions.

It can be almost any possession or use of monies or assets derived from illegal sources, including those obtained innocently, and failure to disclose knowledge or even suspicion of money laundering can also be a criminal offence.

Part 7 of POCA 2002 is headed "Money Laundering", and that money laundering is defined for the purposes of that part of the Act by s340(11) as an offence under ss327, 328 or 329 (and associated secondary or inchoate offences). However, ss327, 328 and 329 are not confined to activities involving money but are very much broader. Section 327(1)(a) makes it an offence if a person conceals criminal property. Property is defined by s340(9) as including all forms of property, real or personal, heritable or moveable, and things in action and other intangible or incorporeal property. Property is criminal property if it constitutes a person's benefit from criminal conduct and the alleged offender knows or suspects that it does: s340(3). So a burglar's wife or partner who allows him to store property in their home, which she suspects he has stolen, may be guilty of a money laundering offence in terms of the statute.

Money laundering is an act which—

(a) constitutes an offence under section 327, 328 or 329,

(b) constitutes an attempt, conspiracy or incitement to commit an offence specified in paragraph (a),

(d) would constitute an offence specified in paragraph (a), (b) or (c) if done in the United Kingdom.

Law Society Definition

The Law Society the professional body of the solicitors'profession in England & Wales, has issued the following definition in its Guidance

"1.11 Money laundering is the process by which the proceeds of crime, and the true ownership of those proceeds, is changed so that the proceeds appear to come from a legitimate source.

1.12 The ability to launder the proceeds of crime is vital to the success of criminal operations. Anti Money Laundering (“AML”) laws and systems are aimed at preventing criminals from being able to benefit from their actions, and at taking the profit out of crime.

1.13 There are three acknowledged phases to money laundering:

Placement – this occurs when cash generated from crime is placed in the financial system. As many crimes generate cash, this is the point at which the proceeds of crime are most apparent and at risk of detection. As banks and financial institutions have developed AML procedures, criminals have to look for other ways of placing cash within the financial system. Entities which commonly deal with client money, such as solicitors' firms, have increasingly become at risk of being targeted to deal with cash. In chapter 6 there is guidance about use of a solicitor's client account and Annex 5 reproduces the Law Society’s money laundering warning card which warns solicitors not to provide a banking facility if there is no underlying legal purpose for doing so. Firms should decide whether to operate a policy which limits the amount of cash they will accept, and explain that in terms of business or client care letters.

Layering – after the proceeds of crime have been placed into the financial system, layering occurs when the money passes through a series of complex transactions in order to obscure the origin. These transactions often involve different entities, such as companies and trusts and can take place in multiple jurisdictions. Solicitors’ firms are at risk of being targeted to assist in money laundering at this stage, although detection can be more difficult.

Integration – once the origin of the funds has been obscured, the funds can reappear as legitimate funds or assets. At this stage the criminals will invest funds in legitimate businesses or other forms of investment. Solicitors will often be used in this process, for example through buying a property, setting up a trust, acquiring a company, or even through the settlement of litigation. This is not an exhaustive list.

Important note: Although paragraph 1.13 describes the usual money laundering phases note that the definition of money laundering offences in POCA is much wider and defines even passive “possession” of criminal property as money laundering. "

Proceeds of Crime Act 2002

In the UK the Proceeds of Crime Act 2002 is the main source of the legislation relating to this subject. However, the real devil has been in the detail of the numerous regulations spawned by this Act and by European Directives with influences even from United States legislation all of which reflect the international scope of the problem.

Criminal Procedure Rules

Criminal Procedure Rules deal with various parts of the Proceeds of Crime Act 2002:

PART 57 - Proceeds of Crime Act 2002 – rules applicable to all proceedings PART 58 - Proceeds of Crime Act 2002 – rules applicable only to confiscation proceedings PART 59 - Proceeds of Crime Act 2002 – rules applicable only to restraint proceedings PART 60 - Proceeds of Crime Act 2002 – rules applicable only to receivership proceedings PART 61 - Proceeds of Crime Act 2002 – rules applicable to restraint and receivership proceedings PART 62 - Proceeds of Crime Act 2002 – rules applicable to investigations

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Categories: POCA | Offences

Money laundering

From CrimeLine from Andrew Keogh

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