How Innocent Parties Can Be Charged With Money Laundering

Receiving bags of cash in a car park is suspicious!

Participating in Hawala style money transfers is often the excuse given by those caught holding large sums of cash. However, many of those caught during a cash handover will be prosecuted for money laundering and receive harsh sanctions from the courts. However, it is possible for an unwitting participant to escape conviction when the full extent of the abuse of the system by both foreign money transfer agents and criminal gangs is explained to the courts.

Banking it in numerous unconnected accounts is worse

If you receive a large bag of cash containing say £100,000 in a car park from somebody you do not know and then proceed to pay it in small chunks into various different accounts held in a number of banks, you will no doubt be participating in organized money laundering.

This is a process that is termed “cuckoo smurfing” by the authorities, breaking up larger amounts into smaller amounts so that they wont be noticed by the bank staff.

Can you be an unwitting participant in money laundering?

Where this has happened and where I am asked to comment on an expert money laundering report prepared by by the NCA or HMRC there is little likelihood that I will find much to criticize. The cuckoo smurfer is normally someone recruited by an international money laundering gang to pick up street cash from criminals, and introduce it into the banking system by splitting it into small amounts that are more likely to be accepted without comment by the vigilant bank staff.

The smurfer is a junior employee of the criminals, a courier if you like, and will not be paid very much. They are “small fish” in this otherwise serious criminal activity, and perhaps should not receive major sentences if convicted.  They can be naive operators, sometimes trusting relations or friends of a money transfer agent based abroad who is working with the criminal gangs. Unfortunately, the persons who do deserve the major sentences, the money laundering controllers and coordinators, who normally operate abroad from centres such as Dubai or Hong Kong, are seldom caught.

Every case is different, but I often see cases involving defendants who have been involved in cuckoo smurfing. While I can never truly know what awareness the individual had of the crime, it is sometimes the case that they are doing a favour for a relative abroad. For example, in a recent case the defendant agreed to help his uncle in Pakistan who was a money transfer agent. He was asked to provide the serial number of a five pound note to his uncle, then given a location where he was to meet somebody to collect some cash. He was also provided with a list of bank account numbers and sums that he was to deposit into those accounts. He duly met the person in a car park and the two established their credentials using the five pound note and its serial number. The defendant then went home and counted the money. As the favour was to be repeated in the future, he had taken the precaution of buying an inexpensive cash counter from eBay. The next month he was asked to repeat the exercise, only this time he was pounced on by the police and arrested for money laundering.

The whole process was examined by the authorities’ money laundering experts who rightly classed the activity as the handover of criminal cash with subsequent cuckoo smurfing by the defendant. I fully agreed with this appraisal. However, my report went further. It also explained the widespread ignorance that appears to be shown by many people who use these money transfer systems regularly. Money is sent to the UK by ostensibly sophisticated people, including professional lawyers and business managers, using local unregistered “Hawala” type operators. Being unregistered, these operators can facilitate the international transfers using agencies that are actually fronts for the organized criminal gangs. The transactions are balanced by using criminal street cash to pay out the recipients in the UK, whereas the legitimate funds originating abroad stay there. In this way, the value of the proceeds of crime in the UK has been transferred abroad.

The criminal gangs rely on a large number of legitimate deposits being made abroad. These can only be processed by the criminals and used to balance the laundered funds in the UK if the persons making the transfers accept the use of unregistered “Hawala” transfer agents. Places like Pakistan and India have introduced registration frameworks for money transfer agents wishing to work outside the government central banks and unregistered businesses are deemed to be illegal. However, they seem to operate freely in shopping centres and high streets and are accepted by the local population.

The worldwide FATF initiatives attempting to combat such financial crime include places like India, with Pakistan being a member of the associated Asia and Pacific Group on Money Laundering. However, this does not seem to prevent the wide scale abuse of the anti money laundering framework by these countries citizens.

The best result? An acquittal

It is clear that the naive participant needs mitigation when caught being exploited by the criminals, and I am often called upon to present an explanation of the legitimate international money transfer framework that works outside the mainstream banks, a framework that is frequently hijacked by the criminals. In some cases this can lead to a complete acquittal, as happened this month in my most recent instruction in this area (as described above).

About Mark Jenner

Mark Jenner is an experienced forensic accountant specialising in fraud and white collar criminal matters. He provides independent financial investigation and expert accounting witness services to police forces, fraud regulators and criminal defence lawyers, also providing assistance and solutions to organisations embroiled in financial disputes.

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