Money laundering is the process by which the proceeds of crime, either money or other property, are converted into assets, which appear to have a legitimate rather than an illegal origin. The aim of the process is to disguise the source of the property, in order to allow the holder to enjoy it free from suspicion as to its source. The process usually involves three distinct phases:
– placement is the initial disposal of the proceeds of criminal activity into apparently legitimate business activity or property.
– layering involves the transfer of money from business to business, or place to place in order to conceal its initial source.
– integration is the culmination of the previous procedures through which the money takes on the appearance of coming from a legitimate source. Money laundering was first made a criminal offence in the United Kingdom under the Drug Trafficking Offences Act 1986 and is now regulated by the Proceeds of Crime Act 2002, and the Money Laundering Regulations 2007, together with the specifically anti-terrorist legislation, such as the Prevention of Terrorism Act 2005. The Proceeds of Crime Act 2002 seeks to control money laundering by creating three categories of criminal offences in relation to the activity.
– laundering
The first category of principal money laundering offences relates to laundering the proceeds of crime or assisting in that process and is contained in ss.327–329. Under s.327, it is an offence to conceal, disguise, convert, transfer or remove criminal property from England and Wales, Scotland or Northern Ireland. Concealing or disguising criminal property is widely defined to include concealing or disguising its nature, source, location, disposition, movement or ownership or any rights connected with it. These offences are punishable on conviction by a maximum of 14 years imprisonment and/or a fine.
– failure to report
The second category of offence relates to failing to report a knowledge or suspicion of money laundering and is contained in ss.330–332. Under s.330 it is an offence for a person who knows or suspects that another person is engaged in money laundering not to report the fact to the appropriate authority. However, the offence only relates to individuals, such as accountants, who are acting in the course of business in the regulated sector. The offences set out in these sections are punishable, on conviction, by a maximum of five years imprisonment and/or a fine.
– tipping off
The third category of offence relates to tipping off and is contained in s.333, which makes it an offence to make a disclosure, which is likely to prejudice any investigation under the Act. The offences set out in these sections are punishable on conviction by a maximum of five years imprisonment and/or a fine.
The Money Laundering Regulations 2007 implement the European Union third money laundering directive. They set out administrative requirements for the anti-money laundering regime within what is referred to as ‘the regulated sector’, which specifically includes auditors, insolvency practitioners, external accountants and tax advisers.
The regulations set out the requirements relating to the manner in which members of the regulated sector should approach their clients and outline the scope of this action on the basis of what is known as ‘customer due diligence’. The regulations create specific offences for those in the regulated sector who fail to comply with its requirements.
It is apparent from the scenario that Ian and Jet are liable to control and prosecution under the Proceeds of Crime Act 2002 as they are involved in money laundering. It is clear that the original money to purchase the football club was not the product of crime, so that transaction itself is not covered by the money laundering legislation. However, even if the club was bought with legitimate money, it is nonetheless the case that it is being used to conceal the fact that the source of much of Jet’s money is criminal activity. Jet would therefore be guilty on the primary offence of money laundering under s.327 Proceeds of Crime Act 2002. Ian is also guilty of an offence in relation to the Proceeds of Crime Act 2002 as he is clearly assisting Jet in his money laundering procedure. His activity is covered both by s.327, as he is actively concealing and disguising criminal property, and s.328 as his arrangement with Jet ‘facilitates the retention of criminal property’.
Ian is also liable under s.330, for failing to disclose any suspiciously high profits from the football club and is clearly in breach of the regulatory regime set out in the Money Laundering Regulations 2007. |
