Money Laundering IF1

What is Money Laundering?

Money Laundering is the process by which money that has been obtained illegally and therefore is 'dirty' is turned into legitimate or 'clean' funds. This can happen on a small or large scale.

Three Stages of Money Laundering

Placement - The process where cash is placed within the financial system and is converted into different financial assets such as cheques or property.

Layering - This is when the criminals will create a series of complex transactions including transfers overseas or trading in stocks/futures so the original origin of the funds is concealed.

Intergration - This is when the criminal gets access to the now legitimate seeming money e.g. by selling stock to the public, buying property and leasing it or creating a company and drawing a salary.

Application of the Law and Regulation

Specific Laws - These define the criminal offences and the penalities that may apply

Regulations - These apply to a particular range of firms which are carrying out activities in the financial sector (not specific to insurance)

Regulatory Rules/Guidance - These apply to different categories of firms in differing ways

Specific Legislation

Criminal Justice Act 1993 - This act extended the Criminal Justice Act 1988 from applying only to drug trafficking and terrorism to making laundering money from other crimes a criminal offence. It requires individuals to report any knowledge or suspicion of money laundering as well as not being actively involved in, colluding in or concealing money laundering. This Act also made 'tipping off' a suspected person a criminal offence. Under this Act 'unlawful conduct' can include any conduct that happened outside the UK which is unlawful in that country or would be unlawful in the UK.

The Three Principal Offences

 - Assisting a criminal who you know or suspect or ought to know or suspect is money laundering. Maximum 14yrs Imprisonment

 - Failing to report either actual knowledge or suspicion of money laundering. Maximum 5yrs Imprisonment

- Tipping off, deliberately telling someone that you suspect them of money laundering or that a formal or police investigation is under way. Maximum 5yrs Imprisonment

Proceeds of Crime Act 2002 (POCA) - This Act extends the range of offences for money laundering. The Assets Recover Agency (ARA) was set up. The ARA financial investigators purpose was to recover the proceeds of criminal activity. A key test is criminal lifestyle which is defined by the…