Money laundering is the
process by which criminal organisations convert or disguise the proceeds of
significant crime transactions into “untainted, clean money” that is
unconnected with and free of any substantial wrongdoing.
It covers the activities
that form the process by which the crime proceeds are disguised or concealed
from their original unlawful actions to appear legitimate, so that criminals
can avoid prosecution or conviction by obtaining or confiscating the proceeds
of crime.
The UK
anti-money laundering requirements today are governed by the following
legislation, amongst others:
- Proceeds of Crime Act 2002, as
amended by the Serious Organised Crime and Police Act 2005.
- The Terrorism Act 2000, as amended
by the Anti-Terrorism Crime and Security Act 2001 and Terrorism Act
2006.
- The Money Laundering Regulations
2007.
Within the UK, the Proceeds
of Crime Act 2002 (part 7) defines money laundering as “the many forms of
possessing or handling criminal property, including the proceeds of a person’s
crime, and facilitating the handling or possession of any other criminal
property by a person or corporate body.”
The Money Laundering,
Terrorist Financing and Transfer of Funds (Information on the Payer)
Regulations 2017 (MLR 2017) and the 2019 Money Laundering and Terrorist
Financing (Amendment) Regulations (MLR 2019) form a significant part of an
organisation’s obligations towards avoiding money laundering issues.
The aim of the MLR 2017 is
to stop organised crime, drug dealers, terrorists, arms dealers, and other
criminals from operating and expanding their criminal enterprises by using
professional services to launder money. The obligations of the MLR 2017 and
the MLR 2019 apply to individuals and organisations that provide services,
accountancy, trust and related services such as audit, insolvency or tax
advice.
Organisations must implement
systems, procedures, and policies to prevent money laundering, adopt a
risk-based approach to assess, identify, and understand the risks to which they
are exposed and put measures in place to identify at-risk customers and suppliers
to monitor how they use the organisation's services for money laundering. It is
a criminal offence within the UK to fail to comply with the obligations to
prevent, recognise and report money laundering.
Organisational policies must
dictate the accurate recording and retention of financial transactions,
suspicious activity reports, consent requests, personal data, third-party
arrangements and training records. Staff responsible for managing organisations'
financial resources must be trained and aware of terrorist financing and money
laundering risks to identify and deal with activities, transactions or
situations related to money laundering and terrorist financing.
Organisations have a duty of
care to ensure that Suppliers who tender for their business are vetted to
ensure that they are not, or have not recently been, involved in any form of
financial crime. Suppliers are explicitly barred from public sector tenders if
they have been convicted within the last five years for taking part in:
- Organised crime.
- Corruption.
- Acts of terrorism.
- Money laundering.
- Child labour or human trafficking.
Suppliers may be disbarred
from public sector tenders if they have been involved in and convicted of any
breach of the following areas of criminality:
- Environmental.
- Social law.
- Labour law.
- Bankruptcy.
- Professional misconduct.
- Distortion of competition.
- Conflict of interest.
Customers and suppliers must
be contacted to conduct due diligence on organisations and their business
operations. Suspicious activities concerning money laundering and terrorist
financing must be reported internally within the organisation and to the
National Crime Agency.
Organisations have a duty of
care to ensure that trading transactions are safeguarded from any involvement
in financial crimes. Monies received from customers or paid to suppliers must
be risk assessed, and actions taken to minimise and mitigate any associated
financial crime risks.
Principal and high-value
payments should only be made to suppliers registered at Companies House within
the UK or otherwise registered in the country where they undertake business
activities. They must also be registered for tax purposes and operate banking
facilities that can be audited through third-party validation services.
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