What is Money Laundering?

This training is about the mandatory compliance to the UK anti-money laundering regime, since you are apart of the ‘regulated sector’ and you need to know more about “what” it is we are helping prevent.  Finding out what ‘money laundering’ is all about is a good place to start. The following is a common definition taken from PoCA.

Money laundering’ is the process by which criminally obtained money or assets (this is known as criminal property) are obtained for ‘clean’ money or other assets with no obvious link to their criminal origins. It also covers money, however come by, which is used to fund terrorism.

The HMRC Guidance goes on to explain that “money laundering takes many forms including:

  • handling the proceeds of crimes such as theft, fraud and tax evasion
  • handling stolen goods
  • being knowingly involved in any way with criminal or terrorist property
  • entering into arrangements to facilitate laundering criminal or terrorist property
  • investing the proceeds of crime into other financial products
  • investing the proceeds of crime into the acquisition of property/assets.

The statutory definition of ‘money laundering’ is consistent with the HMRC definition but is more complex. It isolates the various constituent elements of the offence, including the degree of knowledge of the different parties concerned, and expands the circumstances in which money laundering is deemed to have taken place.

An example of the dangers to staff in the regulated sector from the above definitions, is as simple as a member of staff will be guilty of a primary money laundering offence if he provides regulated services while turning a ‘blind eye’ to a customers’ suspect dealings.

So we can see, the term ‘money laundering’ can actually be quite misleading, it is not just money that is laundered, but it can also be all forms of ‘property’ that represents the ‘proceeds of crime’ either directly and indirectly. This has given rise to this traditional three stage view of the money laundering process;

  • Placement – where cash from criminal activities is placed into the financial system. For example cash businesses or bureau de change.
  • Layering- a complex systems of transactions to hide the source and ownership, for example asset purchase or money transmission and
  • Integration – where the laundered funds are reintroduced back into the financial system appearing to have come from a legitimate source.

The training will put this into a meaningful context over the rest of this section.