What is money laundering?

Money laundering is the process by which criminal proceeds (which could be cash or other property, such as a house or car) are transformed to disguise their illicit origins.

There are three stages involved in  money laundering: 

• Placement

Placement is the movement of ‘dirty’ money from its source and then placing it into circulation through various businesses – for example financial institutions, casinos, shops etc. 

• Layering

The layering stage (or structuring as it is sometimes referred to) is the most complex. The purpose is to separate the illicit money from its source by using sophisticated layering of transactions. This involves moving cash placed in a financial institution electronically from one country to another into various investments and transformed in a way to hide any audit trail. 

• Integration

This is the final stage. Though the placement and layering stages, the money has been fully integrated into the financial system and mixed with funds of legimate origin. Money is then returned to the launderer from what appears to be ‘clean’ sources. 

All accountancy service providers have a legal responsibility to report any knowledge or suspicion of money laundering. They must have policies and procedures in place to ensure that they comply with the relevant legislation.

Therefore, if you employ the services of an accountant they will take certain measures to ensure that they can fully trace all of your financial activities.

An accountant must take the appropriate steps to ensure that you and your business are really who you say you are.

Initially they will carry out identity checks to confirm your:

• name
• residential address
• date of birth.

This also applies to all individuals who own 25% or more of a company.

An accountant will monitor the following:

1. Large or unusual transactions – they will need to check the source of funds
2. Change of ownership or directorship – they will need to identify any new individuals
3. Unusual behaviour – they will need to confirm that there is no need to be suspicious. 

An accountant will complete a suspicious activity report (SAR) if they believe a transaction or activity is suspicious.

This report will be sent to the National Crime Agency (NCA), which leads UK law enforcement’s fight against serious and organised crime.

Make sure that all the transactions you carry out are clear and traceable and you have the relevant documents available to prove all sources of income.

Accountants are not being deliberately nosey or awkward; they have a duty to be robust.