AML Awareness - Professional enablers

City skyline
By Jeremy Clarke

31 October 2016

Ian Fleming created accountant Le Chiffre who worked for SMERSH and Mario Puzo invented Tom Hagen, lawyer for Don Corleone. While they are fictional, every organised crime gang needs professionals to ensure success of the business.

I use the word “business” quite deliberately. Crime is a business, just like running a sandwich shop, a plumbers’ merchants, or an architect’s practice. The primary purpose of crime is to make money.

Those legitimate businesses will have a bank account; they will have a lawyer; and they will have an accountant

Admittedly some criminals like the notoriety, the violence, the power. But most real-life crime lords are faceless, unremarkable men. The kind of people you wouldn’t look at twice if they passed you in the street, sat next to you in the pub or came into your office.

And that’s the problem for us as accountants. You see, to turn their used twenty pound notes earned from drug dealing, human trafficking, prostitution, whatever their vice may be, into money that they can use without attracting attention, they need to legitimise it or, as its more widely called, launder it.

Doing the laundry

The analogy is obvious: put the metaphorical dirty money through the washing machine and out comes clean money which can then be paraded in public without attracting unwanted attention from law enforcement, tax authorities and others. It puts the proceeds of crime beyond the reach of law enforcement and tax authorities, and protects it from confiscation.

More often than not, the “washing machines” are legitimate businesses, either set up specifically for that purpose or hijacked by the crime lords. Whatever the case, two things hold true:

  1. The dirty money has to unobtrusively enter the legitimate business and then be withdrawn by the criminals. Often this process is done many times through different entities – sole traders, partnerships, LLPs, limited companies, even charities. The more often the better – as each time the funds gain a credibility as they are distanced from their seedy origins.
  2. Those legitimate businesses will have a bank account; they will have a lawyer; and they will have an accountant.

Stop the money from becoming legitimate

The anti-money laundering legislation and the procedures that come out of them, that we will be focusing on this week, are designed to make it as hard as possible for criminals to legitimise their earnings.

At its heart, it’s not about form filling and keeping ICAS happy – it’s about making it harder for drug dealers to profit from destroying lives; harder for traffickers to benefit from selling women as sex slaves; harder for loan sharks to rip off struggling families.

The law does not really make much of a distinction between those who deliberately help launder money and those who simply turn a blind eye when they should have seen the tell-tale signs

Bankers, lawyers and accountants can very easily get caught up in helping criminals wash their money.  When they walk into your office for the first time, they won’t have “crook” tattooed on their forehead - they will in all probability look like normal business folk seeking help to run a perfectly normal trade or profession.  

Unfortunately, there will always be some amongst our number who are happy to help and, but the vast majority would be horrified to think that they were aiding criminals.

Either way, if you do get involved, you will be regarded by the prosecuting authorities as a “Professional Enabler”. The law does not really make much of a distinction between those who deliberately help launder money and those who simply turn a blind eye when they should have seen the tell-tale signs.

Sleepwalking into crime

The Proceeds of Crime Act 2002 set out a number of offences that professionals can commit, even unwittingly, by concealing, disguising, converting, transferring criminal property from England and Wales or from Scotland or from Northern Ireland (s327); by entering into or becoming concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person (s328); or by acquiring, using, or possessing criminal property (s329). They could also commit offences by failing to disclose a suspicion that someone is engaged in money laundering (s330 and s331).

There is no excuse

More recently, laws on both sides of the Border have created an offence of participating in organised crime, whether intentionally or not.

In England and Wales, Section 45 of the Serious Crime Act 2015 created an offence of “participating in the activities of an organised crime group”. In this case an ‘organised crime group” is where three or more persons have as their purpose the carrying out of criminal activities.

This is significant because this offence has a slightly lower threshold in terms of “mens rea” or intention to the point where it is effectively one of negligence. Under this Act, you are committing a substantive criminal offence if you have reasonable grounds to believe or suspect that what you are doing is going to assist the organised crime group.

In Scotland, we have had an even wider defined offence for a while longer in the form of Section 28 of the Criminal Justice and Licencing (Scotland) Act 2012. Under that section, it is an offence in itself, carrying a sentence of up to ten years’ imprisonment, if a person does something (whether or not the doing of that thing would itself constitute an offence), and they know or suspect, or ought reasonably to have known or suspected, that the doing of that thing will enable or further the commission of serious organised crime.

Note that in Scotland “serious organised crime” means crime involving two (not three as in England and Wales) or more persons acting together for the principal purpose of committing or conspiring to commit a serious offence.

If you help launder money, even if you only ought to have known that that was what you were doing, it is a serious crime

The crucial thing to notice here is the phrase “ought reasonably to have known or suspected that the doing of that thing will enable or further the commission of serious organised crime”. If you help launder money, even if you only ought to have known that that was what you were doing, it is a serious crime.

In addition, under Section 31 of the same Act, failure to report to the police knowledge or suspicion, gained in the course of the person's trade, profession, business or employment, that someone has committed a serious offence is an offence carrying a five-year prison sentence.

If you take one thing from this article it is this – regardless of the moral issues around helping criminals get their money, failure to take your anti-money laundering obligations seriously and perform them properly could make you a “professional enabler” and land you in jail for up to 10 years.  

Each day this week we will publish articles looking at a different aspect of AML in more detail.  We hope you find them helpful

Topics

  • Anti Money Laundering
  • Practice hub
  • Practice monitoring

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