Money laundering – a definition . . .

By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.

You’ll hear plenty of talk these days about money laundering and you will probably assume it has nothing to do with you.

But it is worth taking a moment to consider how money laundering rules could affect your organisation.

So, over the next couple of weeks, we will take an in-depth look at money laundering.

Money laundering – a definition . . .

Most of us imagine money launderers to be criminals involved in drug trafficking or terrorism or to be an arch-criminal like Al Capone.

However, legislation, in the last decade, has expanded significantly the definition of what we might have traditionally considered as money laundering.

While the general principles remain; money laundering involves turning the proceeds of crime into apparently ‘innocent’ funds with no obvious link to their criminal origins, what has changed is that the definition now includes the proceeds of any criminal offence, regardless of the amount involved.

The key pieces of legislation are:

• the Proceeds of Crime Act 2002 (The Act) as amended by the Serious Organised Crime and Police Act 2005, and
• the Money Laundering Regulations 2007 (The 2007 Regulations).

The Act re-defines money laundering and the money laundering offences, and creates mechanisms for investigating and recovering the proceeds of crime. The Act also revises and consolidates the requirement for those affected to report knowledge, suspicion or reasonable grounds to suspect money laundering. See the panel below for some of the more technical terms of the Act.

The 2007 Regulations

The 2007 Regulations contain the detailed procedural requirements for those affected by the legislation. The 2007 Regulations came into force on 15 December 2007.

Under the Act, someone is engaged in money laundering if they:

• conceal, disguise, convert, transfer or remove (from the United Kingdom) criminal property
• enter into or become concerned in an arrangement which they know or suspect facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person or
• acquire, use or have possession of criminal property.

Property is criminal property if it:

• constitutes a person’s benefit in whole or in part (including pecuniary and proprietary benefit) from criminal conduct or
• represents such a benefit directly or indirectly, in whole or in part and
• the alleged offender knows or suspects that it constitutes or represents such a benefit.

Who is caught by the legislation?

Certain businesses have been affected by anti-money laundering rules for some time, for example, banks and other financial institutions.

These businesses have been required to put in place specific arrangements to prevent and detect money laundering.

However, the current regime also requires many more businesses to introduce procedures to combat money laundering and the criminal activity that underlies it.

As money launderers have resorted to more sophisticated ways of disguising the source of their funds, legislation aimed at catching those involved has become necessary.

The regulated sector

The legislation relates to anyone in what is termed as the ‘regulated sector’, which includes but is not limited to:

• accountants and auditors
• tax advisers
• financial institutions
• credit institutions
• dealers in high value goods (including auctioneers dealing in goods) whenever a transaction involves accepting a total cash payment equivalent to €15,000 or more, whether in a single operation or in several operations that are linked
• casinos
• estate agents
• some management consultancy services
• company formation agents
• insolvency practitioners
• legal professionals

Those businesses that fall within the definition of being in the regulated sector are required to establish procedures to:

• apply customer due diligence procedures
• appoint a Money Laundering Nominated Officer (MLNO) to whom money laundering reports must be made

• establish systems and procedures to forestall and prevent money laundering and
• provide relevant individuals with training on money laundering and awareness of their procedures in relation to money laundering.

If your business is caught by the definition you may have received guidance from your professional or trade body on how the requirements affect you and your business.

We will explore money laundering issues further in the next Money Matters column.

Finally, a few reminders on the tax front –

• Remember 19th of the month PAYE/ Class 1 contributions and CIS deadline or 22nd if paying your PAYE electronically
• The Tax Credit Renewal date is getting closure – ensure yours are submitted by 31 July

You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) –

http://www.clayshawbutler.com/news/latest-news-for-business

We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.

We stay ahead of the game by putting great store by continual professional development for our staff.

With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.

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The team at Clay Shaw Butler can be contacted on 01267 228500.

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