Money Laundering – Professional Obligations

I remember back in 2003 when the Proceeds of Crime 2002 legislation and associated Money Laundering Regulations 2003 (both subsequently amended by Serious Organised Crime and Police Act 2005 and Money Laundering Regulations 2007) were coming into force. As an accountant working in the regulated sector and specialising in fraud/asset tracing/money laundering I naturally took an interest in these new developments.

For the first time professionals, namely accountants and lawyers, were placed firmly in the firing line when it came to dealing with crime. It was argued that criminals needed professionals to not only give their exploits a veneer of respectability but also to help them get rid of their criminal earnings – to help launder the money. In fact history has shown that most big time money launderers for organised crime have been lawyers and accountants.

So now we were expected to be the government’s unpaid guardians preventing illegal money transfers – in a way banks and other finacial institutions had already been recruited. I gave lectures around the firm about the penalties for getting it wrong, for tipping clients off or even being in a position of being accused of actually laundering the spoils. One talk was at Northumbria Police’s inaugrual North East Fraud Forum conference held in St James Park,  Newcastle in March 2003. That drew around 300 delegates from all over the country – the general feeling was of uncertainty as to how the developments would affect professionals. I was also one of the few civilians to attend the Association Of Chief Police Officers biennial Fraud Forum later on that year in the Autumn – with a very similar theme of money laundering. Again I remember that the talks discussing professional involvement were a little unclear.

By now we all know that a number of professionals have found themselves in deep water (or prison to be precise) for turning a blind eye to their clients activities – even if they were not involved directly. We have to undertake rigorous checks on our clients – check their passports, utility bills, addresses, company details etc. To “Know Your Client” and to report any “suspicious activities” means that we should be able to prevent the criminals from dealing in financial transactions.

But fraud is as prevalent as ever. The frauds seem to be getting bigger (Maddoff!) and the estimates of its effect on the economy are growing (£100 billion per annum in the UK – 5% of all USA businesses turnover lost to fraud). I do not think that the new legislation and regulations have made any difference to the seriod fraudster and their supporting cast of professionals. They have given the rest of us professionals another layer of regulatory administration to struggle with!

As a forensic accountant specialising in fraud investigation I do two types of work. The first is publicly funded – I am paid by the Police, the Department for Business Innovation and Skills, the Legal Services Commission etc. Publicly funded work is not considered to be regulated and therefore I do not check out my client (KYC) and I am not concerned about reporting and fraud or crime I come across – because it would be pointless reporting to SOCA when I am already working for the Police (for example).

The other type of work is privately funded – i.e. I am investigating (usually fraud) for a private client. Whichever way you look at it, fraud is a crime and therefore not only have I carried out checks on my client (the victim of the fraud) but in all likelyhood I will have to put in a SAR to the Serious and Organised Crime Agency. In practice I will do this and also report to the appropriate police force regional fraud liaison officer to ensure that my client’s business is not surprised by a dawn raid!

It seems that we still have a way to go, probably by way of simplification of the current Act and Guidelines and a more joined up approach between the public and the private sector, before we professionals can be properly effective in assisting the authorities in their fight against fraud and organised crime.

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