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As a law firm, it’s not uncommon to handle large financial transactions, for example, during the sale of property. These large transactions make law firms and other professional services a prime target for money laundering. Criminals look to “pass” money through established businesses to cover the origin of the money and make it seem legitimate.
If you have any further questions surrounding our anti-money laundering policies, please don’t hesitate to visit our contact page or contact a member of the team on 020 3007 5500.
What is money laundering?
When thinking of money laundering, you may think of the days of Al Capone and the New York gangsters. However, money laundering is a common and genuine threat in many instances in today’s world.
Simply put, the act of money laundering is the process by which the proceeds of criminal activities enter the financial system. Hence, the money appears ‘clean’ (or ‘laundered’) because it looks as though it has come from a legitimate source. While many people think money laundering is only undertaken by criminal masterminds, this isn’t the case. Money laundering is, however, normally tied to other criminal activities.
For example, a drug dealer may sell drugs for large amounts of cash, but they obviously can’t declare the source of their income. Commonly these individuals will spend their cash on day to day shopping, or bigger items like cars, where cash is taken as payment.
If they belong to a cartel or gang that is more sophisticated, they may operate ‘fronts’ that look like a legitimate business, but whose primary aim is to take cash and put it through the business’ books, thereby laundering it.
It’s difficult for each and every business to track where money has come from, which is why there are strict rules placed on financial and professional services, like law firms, to try to track and report instances of money laundering.
How does money laundering work?
Money laundering typically follows three stages, however the stages can look very different depending on the methods chosen:
- Placement: This is where the proceeds of crime are initially put into the financial system and where money laundering is easiest to detect.
- Layering: This is where the proceeds are moved around through various transactions to try and hide their origins, making them appear legitimate. An example may be somebody buying a house with illegitimate money and quickly selling it on.
- Integration: This is when the sources of the proceeds have been successfully hidden, and have become available for use for legitimate reasons. Example of integration is putting the money back into the economy through setting up a company, buying property etc.
In all three stages, the further along the process a criminal can get their proceeds, the harder it is for the authorities to detect it as money laundering.
This is because the money has become more and more intertwined with legitimate cash. For example, a coffee shop earns £2 from a legitimate customer, and £2 from a criminal and then banks all £4. How can the bank tell which £2 came from the criminal, and even if it could, how does it know what the source of that £2 was?
Thus, it’s essential to catch suspicious activities as soon as possible.
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What happens if an institution fails to run anti-money laundering checks?
A professional or financial institution that doesn’t take anti-money laundering measures seriously risks hefty fines, negative publicity, damage to corporate reputation, closure of the business and prison time for associates.
An example of a company that didn’t conduct proper anti-money laundering and customer due diligence is HSBC.
HSBC was hit with a fine of £1.2 billion in 2012 because the bank was found to have severe shortcomings in their anti-money laundering controls, specifically regarding customer due diligence. It was named a conduit for “drug kingpins and rogue nations” by the US senate due to its failures.
HSBC had transferred $7bn in US bank notes from its Mexican affiliate to the US, more than any other bank. But it hadn’t run sufficient anti-money laundering checks on this cash, and didn’t think the practice was suspicious. And this was just one of HSBC’s shortcomings that led to its fine.
How do law firms prevent this?
Britton and Time Solicitors handles monetary transactions on behalf of clients and as such, we have an obligation to look for, and report signs of money laundering. Each and every client is required to undergo strict due diligence checks.
They must provide us with photographic identification (such as a passport or driving licence) and proof of current address dated within the previous three months (bank statement, utility bill, council tax bill).
This identification information, once certified, is then used to complete an electronically verified anti-money laundering check. For a returning client, this check is repeated every three years, or when their photographic identification document has expired.
These checks are a vital part of our commitment to the Proceeds of Crime Act 2002 (POCA). This act ensures our firm isn’t used for criminal activities. The act outlines the principle offences relating to money laundering, the offences of failing to report suspicions of money laundering, and offences of tipping off about money laundering investigations.
We keep our firm safe and secure, so we can keep providing you, our clients, with an excellent standard of professional legal help.
Why contact our criminal law solicitors?
If you believe you may be under investigation for money laundering or receiving illegal proceeds, our criminal defence solicitors in Brighton and Hove can help. As it has been made clear in this article, the consequences of being found guilty are severe. So, it’s essential you use one of our highly qualified criminal defence solicitors for you or your company today.
Our criminal defence solicitors will provide top quality legal advice and case management to ensure you get the best outcome possible for your case.
For more information, please visit our money laundering defence page or call one of our solicitors directly on 020 3007 5500.
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