How forensic accounting can moderate over-zealous asset seizure applications where the Crown is making assumptions of money laundering.
There is little doubt that money transfer systems form a significant link in the UK’s £ multi-billion money laundering problem. This rises to multi-trillion if you begin to look globally! In Britain the FCA is active in regulating not only banks but also the more informal “alternative” money service businesses. These are commonly referred to as “Hawala”. However, the FCA focuses its efforts on using regulatory enforcement powers rather than bringing criminal prosecutions for money laundering offences. This is because civil cases require a much lower standard of proof.
Harsher criminal sanctions are sought by other agencies that include the Police, National Crime Agency and HMRC. They investigate and pounce on cash that is being handed over in the street (or supermarket car parks).
Jail Is Less Of A Threat?
The usual outcome of this is that small players couriering cash are prosecuted and face jail. The shady coordinators responsible for moving many £ millions may get a slap on the wrist when facing regulation breaches.
In many countries informal Hawala operators are illegal. Often the authorities turn a blind eye. Unregulated money transfer agents will deal with a wide range of individuals and companies to transfer money to the UK. The problem is that they are unregulated. Their very “informality” encourages them to enlist the services of international agents often operating in hubs such as Dubai. These agents facilitate the international part of the transfer. Inevitably these international agents interact with the criminal money laundering gangs. They may even be the criminal masterminds!
The parents of a foreign student sending university fees to the UK will unwittingly be a party to money laundering. Their transfer to the UK might be settled with criminal cash deposited into their son or daughter’s bank account.
This is just one area where individuals transfer cash. There are over half a million foreign students paying up to £60,000 a year in education fees. This is tens of £ billions every year. Then there is repatriation of savings and foreign trade. A very large proportion of such transfers use the Hawala route from countries where the method is illegal!
The difference in the UK is that unregulated Hawala agents do not operate freely as they do in other countries. This means the criminal gangs fill their place directly. In our country Hawala dealers are legitimate, so long as they fulfil the regulations monitored by the FCA and HMRC. Fearing only the regulatory slap on the wrist, they frequently stray into the area of money laundering. This means that there is a grey area surrounding the settlement of transactions in this country. Many people from varying ethnic cultures are much more readily receptive to the idea of transfers abroad arriving as cash.
Forensic Accounting Solutions
As a forensic accountant I specialise in fraudulent money laundering and Hawala style transfers. I see a large number of cases where an individual in this country finds that their bank freezes their accounts. They they are subject to an asset seizure application. The Crown will argue that the UK’s Proceeds of Crime Act allows assumptions. I.e., if unidentified cash settles transfers from abroad it must be from criminal sources. They will also argue that the recipient ought to have known that the funds came from illegal sources.
Fortunately, sense can prevail in such matters. This is only if it can be shown that the funds that the recipient was expecting originated from legitimate sources. An example of these would be foreign savings or property. This is where I use my forensic accounting to trace sources of money. I can also provide a rational explanation of how Hawala works legitimately around the world.
Alleging that a recipient knows that criminal gangs might hijack the transfer is not necessarily appropriate. Very often the use of a Hawala agent in a foreign country is the only method for transmitting funds. For example, I have seen a couple of cases recently where Iranian nationals were fighting seizure applications in the UK. In each case they were sending several £ millions to Britain. They were using informal transfers systems, under the advice and supervision of the individual’s Iranian lawyers. Otherwise, after the USA sanctions against Iran the UK banks would not accept funds from this source. They meekly follow American guidance even if not obliged to do so.
As ever in such matters the asset seizure orders fail and the bank accounts unfrozen. Surely this is a waste of UK taxpayers money?