Providing insight and understanding
Globalisation, sophisticated organised crime and the high-value property market in London are some of the reasons the UK has become increasingly concerned about money laundering. These factors can make it difficult to trace money laundering and help to explain the regulatory response.
Money laundering is the process by which the proceeds of criminal conduct are dealt with in order to disguise their unlawful origins. It is an offence to conceal or remove from UK jurisdiction the proceeds of crime, to enter into an arrangement with knowledge or suspicion of the use of the proceeds of crime, and to use or possess the proceeds of crime. These offences all require knowledge or suspicion of money laundering, which can be proved on the facts of the crime and the involvement of the individual, aided by the low bar for suspicion. This criteria can encompass those directly involved in the predicate crime as well as those facilitating, benefitting, professionally working with or related to the suspected individuals.
In order for the act of disguising money to be unlawful, it needs to be criminal property. This is defined as any benefit from criminal conduct, including money or goods and any profits gained from the original offence. There are separate offences within proceeds of crime legislation for the failure to report money laundering (only covering the regulated sector, such as financial services). These cover instances in which a person in a business or the Money Laundering Reporting Officer (MLRO) fails to disclose knowledge or suspicion of another’s involvement or is involved in tipping off a person suspected of involvement and discloses suspicion of a person’s involvement to that person in a way that is likely to prejudice the investigation.
In practical terms, the act of money laundering commonly manifests itself as a cycle, involving the purchase of an asset with illegitimate money, the sale of that asset and the subsequent reinvestment of the funds into another asset. The repetition of this process makes it more difficult to trace the original illegitimate funds, thereby concealing criminal proceeds within a country’s financial system.
There are additional provisions to prevent businesses from being used as money laundering vehicles. These provisions largely stem from legislative developments at the European level, but have resulted in what is known in the UK as the Money Laundering Regulations 2017 (“the 2017 Regulations”). The 2017 Regulations are specifically designed to reduce the risk of professional services being used for money laundering, thereby requiring various organisations including trust and company service providers, financial institutions and accountancy and legal advisors to monitor clients’ use of their service.
A positive obligation is imposed on organisations to design processes and procedures that reduce the risk of their becoming embroiled in money laundering. There is detailed guidance within the 2017 Regulations on what this involves, including customer due diligence among other things:
- analysing the risk of your business being implicated in money laundering;
- validating the details of your customers to confirm their identity;
- checking the details of ‘beneficial owners’ of corporate entities; and
- conducting ongoing monitoring.
Defending money laundering accusations
If there is a breach of anti-money laundering rules, the sanction can be severe depending on the kind of offence that has been committed and whether or not there is a plausible defence to the allegation. Defences to allegations for breach of the Proceeds of Crime Act 2002 (POCA) are possible but limited, usually arising where there is evidence of sufficient disclosure to the authorities or an intention to do so but a reasonable excuse not to have disclosed.
It is also possible to defend against allegations for having breached the 2017 Regulations by analysing the technicality of the alleged conduct and any associated guidance published by professional bodies and the regulator. A deep understanding of anti-money laundering law and the requirements of customer due diligence is required.
Heightened concern about money laundering has also led to financial and other institutions in the UK terminating or declining to offer services to some individuals and businesses. The ramifications of such a decision can be severe and have a knock-on effect on business and business growth. We understand that assessing the basis for the decision and planning how best to respond is the first step. At Bright Line Law we are experts in anti-money laundering law and can advise and represent you in dealings with financial institutions.
Source of wealth
Positive obligations are imposed on banks, estate agents, property developers, investment firms and other professional persons to be satisfied of the source of a person’s wealth. The need to provide comprehensive information on wealth can be an essential step to the securing of a bank account, new property or investment in the UK. For professional persons and companies required to undertake proportionate Customer Due Diligence (CDD) or Know Your Client (KYC) checks as part of the UK’s Anti-Money Laundering (AML) framework, either in relation to a particular client or a large group of clients, a question mark can sometimes arise as to whether the CDD undertaken is sufficient or whether more enquiries should be made.
Relatedly, there are wide-ranging powers in UK legislation to seize and freeze property pending the provision by a person of satisfactory information as to the source of his or her funds or other property. One such example is the power of the court to impose an Unexplained Wealth Order on an individual requiring him or her to explain his wealth but other powers such as cash forfeiture, account forfeiture and listed asset forfeiture powers often in practice also require explanation of how that asset or money came to be held. The provision of such information can also be essential to successful dealings with the UK’s enforcement authorities.
At Bright Line Law, we are experts on AML, source of wealth matters, KYC and CDD. We regularly advise regulated professionals on their firm’s obligations and discrete client matters. We also advise individuals, including those with a high profile, who are or may be Politically Exposed Persons or who are high net worth, who wish to ensure that their source of wealth or funds is able to withstand scrutiny. We can be instructed to advise on CDD, AML requirements as well as by regulated professionals, individuals and firms to put together comprehensive source of wealth packages for use in AML CDD, dealings with financial and other institutions, broader due diligence enquiries and investigations by UK and international authorities. We can also proactively prepare source of wealth packages in anticipation of any future matters or exposure or for use in CDD. Our approach is responsive and thorough as, at every step of the way, we know what to look for.
Working with Bright Line Law
Bright Line Law possesses a wealth of experience in this area; our team prides itself on being at the forefront of developments in money laundering and proceeds of crime laws. Our reputation for excellence means we are regularly instructed by professionals and individuals for transaction advice, the question of reporting a suspicion, consultation on policies and anti-money laundering training. We are also experienced litigators in proceeds of crime matters, having successfully navigated civil and criminal proceedings. When representing clients we have worked with complicated financial transactions and forensic experts, using our knowledge and expertise to achieve the best outcome for our clients.