The term money laundering has been applied to the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin so that they can be retained permanently or recycled into further criminal enterprises. The G7 group of countries have set up the Financial Action Task Force (FATF). The FATF has developed three main measures to combat money laundering:
- Criminal offences for money laundering;
- Measures to identify laundered proceeds in financial institutions and elsewhere, with a view to their confiscation; and
- Introduction of laws and systems to prevent the proceeds of crime being laundered in the first place.
Many countries have adopted the FATF recommendations and have passed money laundering legislation to deal with the proceeds of serious crime and have set-up systems to develop intelligence on, monitor, and solve the problem, giving primary responsibility for enforcement of money laundering regulations to the Customs Authorities and the police. The money laundering regulations also placed requirements on the financial and professional services sectors to introduce systems and controls to prevent money laundering in the first place. These requirements are backed-up with criminal sanctions for failure to comply. In particular, institutions must ensure:
- proper identification is obtained from customers;
- records are kept of identifications produced and transactions made;
- a person is nominated within an organisation to receive notes of suspicions of money laundering from staff and pass them to the relevant authority; and
- staff are regularly trained to guard against money laundering.
Initially, money laundering was thought to be a problem mainly associated with international drug trafficking. Subsequent trends have demonstrated money laundering was not purely confined to drugs. It was especially prevalent in financial fraud particularly tax evasion of the type discussed above. Money laundering is ubiquitous. It can affect financial institutions everywhere. The perception that it only takes place in Caribbean islands, Panama or Hong Kong is not the case. For instance, the FATF indicates that London is one of the prime areas for international money laundering due to the diversity of the financial institutions located there.
Our approach to the risk of money laundering is, as you would expect, similar to our approach to the issue of financial guarantees, which is to provide:
- Awareness training seminars to arm relationship managers with the knowledge to identify risk situations or transaction;
- Risk assessment checklists to help identify risk in advance and to provide relationship managers with the required knowledge to evaluate those risks; and
- Customs Profiling Checks, which provide a ‘one stop shop’ in respect of checking the bona fides of new or potential clients.
Clearly, these types of services can only be provided by people with an expert knowledge of the subject. We are fortunate to be staffed by former members of the Customs Investigation Service, who had responsibility for dealing with these matters.