What do I need to know about money laundering and the law?

What do I need to know about money laundering and the law?

Money laundering is the process of channelling ‘bad’ money into ‘good ‘money in order to hide the fact the money originated from criminal activity.

For example, if an individual had stolen £200 and he was later stopped by a policeman and asked where he had got his £200 from, he would not be able to show where it came from as he would have no receipt, bank statement or wage slip showing where the money originated from.

However, if the individual was able to place the money in a solicitor’s account, or in a temporary betting account, and then withdraw the money, he would have a receipt for doing so and the money would seemingly have originated from a non-criminal source.

Most money-laundering offences concern far greater sums of money since the greater the sum of money obtained from a criminal activity, the more difficult it is to make it appear to have originated from a legitimate source or transaction.

Phases of money laundering

A typical money-laundering transaction usually has three phases:

  1. Placement: This is the process by which the money obtained through illegal means is placed back into the financial system. The idea is to place the money in certain accounts or systems for an apparently legitimate purpose. One example of this would be attempting to place £30,000 in a solicitor’s account for anticipated settlement of a dispute or legal costs. The money appears to be there for a legitimate purpose.
  2. Layering: This is the process by which the cash becomes separated from its criminal origins usually through a series of bank transactions, or buying certain goods and services. In our example the small payment of legal fees and the amount towards settling a dispute is part of this process.
  3. Integration: This is the process by which the money is taken back by the individual from its supposedly valid source. In our example the individual would remove the money from the solicitor’s account, perhaps under the ruse that their issue has now been resolved. The individual will be given a valid receipt from a solicitor’s firm and therefore is better able to show the money has come from a legitimate source rather than criminal activity.

A criminal offence

Money laundering is a criminal offence. It can apply both to the individuals who launder money and to those who assist, conceal, or do not act accordingly when they suspect money-laundering activities.

Professional organisations, such as the solicitor’s firm we used in our example, are an easy target for people attempting to launder money. As a result stricter identification checks have been enforced. If an organisation suspects an individual may be attempting to launder money, it must contact SOCA (serious organised crime agency) without telling the individual concerned.

It can be a criminal offence to even tip off the individual that his money is being investigated, and certainly any attempts at concealing the money laundering will leave that individual or company looking at criminal punishment.

Money laundering is a serious criminal offence that carries a maximum penalty of 14 years in prison along with hefty fines, and all companies should be aware of their responsibilities in this area of law.

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