Money Laundering And Asset Seizure Applications

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, multi-trillion if you begin to look globally! In Britain the Financial Conduct Authority is active in regulating not only banks but also the more informal “alternative” money service businesses that 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 because civil cases require a much lower standard of proof.

This tends to mean that the harsher criminal sanctions are sought by other agencies that include the police, National Crime Agency and HMRC. They investigate organised gangs and pounce on bags of cash that are in the process of being handed over in supermarket car parks throughout the UK.

Jail Is Less Of A Threat?

The usual outcome of this is that it is only the small players couriering cash who are prosecuted and face jail, whereas the shady transfer businesses each responsible for moving many £ millions of criminal street cash may only get a slap on the wrist when suspected of regulation breaches.

In many countries informal Hawala operators are illegal, but very often the authorities turn a blind eye. Thus, unregulated money transfer agents will accept instructions from a wide range of ostensibly legitimate individuals and companies to transfer money to the UK. The problem is that being unregulated, their very “informality” encourages them to enlist the services of international agents often based in hubs such as Dubai to facilitate the international part of the transfer. Inevitably these international agents either interact with the criminal money laundering gangs…or in fact are the gangs in the first place.

This means that the parents of a Chinese, Indian or Pakistani student sending funds to the UK for their child’s education will unwittingly be a party to money laundering when their transfer to the UK is settled with criminal cash deposited into their son or daughter’s bank account.

This is just one area where cash is being transferred. If you consider it alone there are over half a million foreign students paying up to £60,000 a year in education fees…tens of £ billions every year…then there is repatriation of savings, foreign trade…a very large proportion of such transfers use the Hawala route from countries where it is meant to be illegal!

Unregulated Hawala

The difference in the UK is that unregulated Hawala agents do not operate freely as they do in other countries, so instead the criminal gangs fill their place directly. In our country Hawala dealers are legitimate, so long as they fulfil the rules and regulations that are 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, with many people from varying ethnic cultures being much more readily receptive to the idea of transfers abroad arriving as cash deposited into their bank accounts.

Forensic Accounting Solutions

As a forensic accountant specialising in fraudulent money laundering and Hawala style transfers, I see a large number of cases where an individual in this country expecting transfers from abroad suddenly finds that their bank accounts are frozen and they are subject to an asset seizure application. The Crown will argue that the UK’s Proceeds of Crime Act allows a presumption to be made that any transfers from abroad have been settled using criminal cash unless it can be shown otherwise. 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 but only if it can be shown that the funds that the recipient was expecting originated from legitimate sources, such as foreign savings or property. This is where my forensic accounting input is commonly used along with providing a rational explanation of how Hawala is used legitimately around the world.

Also, the argument that a recipient ought to have known the funds would be hijacked by criminal gangs during the transfer process is not necessarily valid. Very often the use of a Hawala agent in a foreign country is the only method for transfer. For example, I have seen a couple of cases recently where Iranian nationals were fighting seizure applications in the UK. In each case several £ millions were sent to Britain using informal transfers systems, under the advice and supervision of the individual’s Iranian lawyers. Otherwise, after the USA sanctions against Iran whereby the UK banks, meekly following the American guidance (though not obliged to do so), would not accept funds from this source.

As ever in such matters, when the source of the funds can be traced and the beneficial ownership of the original wealth can be shown, the asset seizure orders fail and the bank accounts unfrozen.

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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