Money laundering has increased over the last two years with accountancy and business advising firm, BDO LLP recording an increase of over 300% in the UK alone; from £70m laundered in 2012, to £288 million in 2013. This figure highlights that there is a clear need for organisations that could be target by money launderers to have robust anti-money laundering (AML) checks in place and ensure they are complying with regulation. Failure to comply with regulations can result in a number of penalties ranging from substantial fines and revoked licenses, reputational damage and custodial sentences. Recent cases include the Leeds based solicitor who recently received a 30 month prison term for failure to comply, a £12,000 fine for a Leicester based estate agent and the colossal £7.6m fine that the Standard Bank incurred for its neglect.
There are three stages of money laundering.
Placement is the first stage – This is when the money launderer begins placing the ‘dirty’ money into the financial systems. Large amounts of cash will be spread across numerous accounts, or used to purchase money orders, currency exchange, gambling, credit repayments etc. The money is split several times as large amounts would be likely to raise suspicion.
Then comes layering – The money launderer moves the criminal funds around several times often internationally. The aim is for the launderer is to give the funds a legitimate appearance and disguise the trail from the original source. Electronically is a common way for the funds to be moved around.
The final layer of money laundering is integration – The launderer now brings the funds back in to the economy appearing legitimate. This could be the purchase of a property, shares, vehicle purchase etc. The ‘dirty’ money appears to be ‘clean.’
Procedures are becoming more stringent in line with the upcoming 4th European Money Laundering directive, with an increasing focus on checking PEP (politically exposed persons) files and HMRC sanctions checks. The European Money laundering directive will also see a change in the classification of a ‘high value dealer’, meaning that any business relationship worth over £7,500 will now be subject to money laundering regulations.
The all important question is – am I complying with regulations? Your business could be at risk if you do not follow the AML regulations.
Author: Emma Jouhin