Money laundering is the process of disguising illegally gained funds and integrating it into legitimate financial systems. Up to £100 billion is suspected to be laundered through the UK every year. The proceeds from this criminal activity have a far-reaching and damaging impact, financing criminal activity including sex trafficking and terrorism. Organised crime groups and corrupt elites launder the proceeds of crime to fund lavish lifestyles and reinvest in criminality. So, when people say money laundering is a ‘victimless crime’ that is patently not true.
Whilst the Government and crime-fighting agencies are stepping up efforts to tackle money laundering, businesses have an important hand to play too. Those operating in the accountancy, legal and property industries are particularly exposed to the practice of money laundering and need to vigilant and are legally obliged to report suspicious activity. “It’s virtually impossible to launder money without banks, lawyers and accountants involved,” says Jeffrey Davidson, managing director of Honeycomb Forensic Accounting. “Because we manage people’s money through client accounts or through doing their books, people are able to use accountants unwittingly.”
However, the onus is not just on accountants and legal professionals to be wary of money laundering. Any business can unwittingly play a role in laundering dirty money. In a recent example, overseas fraudsters were using investments in UK startup companies to disguise proceeds from crime. Business owners can be convicted even in cases where they were tricked or simply unaware. That’s why it’s so important to familiarise yourself with money laundering red flags and safeguard against the risk by conducting proper due diligence on new and existing clients.
Here are the ten red flags identified by Flag it Up that you should be looking out for.
- Client identity: Has your client taken any steps to hide their identity, or is it difficult to identify who exactly the beneficial owner of any transaction is?
- Client appetite: Have you, or any other professionals involved in the process (to the best of your knowledge) been instructed from a distance, asked to act outside of your usual specialities, or been offered a particularly high fee to carry out the work?
- Client behaviour: Are they particularly anxious to complete their transaction? Are they unable to tell you why they need completion quite so quickly?
- Documentation: Are documents being withheld by your client, or do you in any way believe them to be falsified?
- Resources: Are funds made up of a disproportionate amount of private funding, cheques or cash, considering their socio-economic profile?
- Transactions: Do you believe that there are any unusual transactions in terms of their size, frequency or manner of execution, given the business type of the client?
- Political status: Does the client have a prominent public title or function or have strong ties to anyone who does, and if so are they engaged in any unusual private business?
- Geography: Is collateral such as property located in a high-risk country, or are the client or parties related to the work residents in such a country?
- Assets: Does it seem as though the client’s assets are in any way inconsistent with their known and legitimate income?
- Structures: Does the nature of the transaction involve any complex or illogical business structures, which make it unclear who ultimately is responsible for conducting it?
For additional information about the ‘Flag it Up’ campaign, or more advice on how to tackle money laundering, please visit FlagItUp.campaign.gov.uk