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 disqualified 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.
Due diligence must be carried out with
customers and suppliers to identify 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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