In short, money laundering involves taking the financial proceeds of criminal activity and making them appear legal by passing them through legitimate businesses.
Via this process, criminals seek to disguise the source of the funds so that they can be enjoyed without the criminal activity that generated the income being discovered. It is often the result of ill-gotten gains from drug trafficking and a variety of organised criminal activities.
It is estimated that an average of 1.5 trillion dollars is laundered globally each year which roughly equates to 3.6% of the world’s gross domestic product.
When did money laundering laws come into force?
In order to safeguard the UK’s financial system and make it harder for the profits from criminal activities to be enjoyed, money laundering regulations first came into force in the UK in the 1930s. There have been several revisions to these laws over the years to take into account new technologies and tactics used to launder money.
The most recent change to UK money laundering regulations took place in 2020 with the latest legislation incorporating international standards set by the Financial Action Task Force (FATF) and to transpose the EU’s 5th Money Laundering Directive.
All UK businesses are legally obligated to have appropriate anti-money laundering systems in place however more and more individuals are being targeted by criminal gangs who wish to use their personal bank accounts to launder money in smaller, yet regular transactions in return for a cut of the proceeds.
This may appeal to some who find the lure of ‘cash for nothing’ an attractive prospect, but what many people that allow their bank accounts to be used for these purposes fail to realise is that they are also guilty of a crime that carries significant legal implications. If discovered, their bank accounts may be closed down and unable to then find another financial institution that is willing to accept them in the future.
What’s the difference between unlawful and illegal relating to money laundering?
With these two terms being used interchangeably, it can be difficult to fully understand the differences between unlawful money laundering and illegal money laundering. However, it is these differences that can impact the severity of the charge and the consequences of the crime from a legal perspective, so it is worthwhile examining the two in further detail.
Unlawful money laundering
When it comes to money laundering, unlawful laundering is considered an act that goes against the established law.
This means that there isn’t necessarily a specific law enacted by a legislative authority to condemn it, but it is unlawful. It is considered to go against a moral or ethical code but doesn’t have a designated piece of UK legislation to back it, regardless of the fact that it goes against what is actually allowed.
Illegal money laundering
In direct contrast to unlawful money laundering, illegal money laundering has been outlawed by the governing law of the land in which the crime takes place and is therefore punishable by that territory’s laws.
What are the consequences of failure to report money laundering?
Even if you aren’t laundering money yourself but are aware that the criminal activity is taking place, you can be subject to legal proceedings for failure to act on any information you receive.
Under the Proceeds of Crime Act 2002, the following offences carry significant jail time and criminal prosecutions. They illustrate why failure to report money laundering is so serious in the eyes of the UK justice system:
• A failure to report money laundering
• Knowingly handling or hiding the proceeds of crime (which refers to illegally obtained banknotes or coins of any currency, all cheques, bank drafts or amounts held in bank accounts)
• Being unable to clearly prove that the source of the income in query was legal when questioned
• Being involved in any other activity that was knowingly undertaken in relation to money laundering or terrorist financing
Anyone found guilty of money laundering offences can serve time in in prison for up to a maximum of 14 years, regardless of whether they are a perpetrator of the crime or merely assisting someone else in their money laundering activities.
If you are aware of money laundering activities taking place, it is advised that you first approach the police with any evidence you may have and then seek legal advice immediately from a criminal law specialist with experience in this area.