Money Laundering… Yes, it really is washed and dried!

On the 19th April 1973, a journalist for The Guardian newspaper wrote “Suitcases stuffed with 200,000 dollars of Republican campaign funds; money being ‘laundered’ in Mexico.” 

This was the first ever use of the term to ‘launder money.’  Who would have thought that these two creative words would ever become so familiar and commonplace?

You might think it a strange term to use when referring to money, but having taken a look back and delved a little deeper, it does makes sense… 

It was once rumoured that Al Capone used to add any illicit money made from the selling alcohol through his launderette profits to hide it.  When the cash literally had any blood on it, it really was washed.  Even more surprisingly, should counterfeit notes need to be made to look as if they have been in circulation for some time, the money is given a turn in the tumble dryer to make it look older.  So yes, in some circumstances, it really is laundered!

But what, I hear you say, has this got to do with me?  Our corner of West Sussex is hardly renowned for its mobster activity. 

It is most likely however that some of the £36-90 billion that the National Crime Agency estimates is laundered in the UK each year, actually takes place in your neighbourhood.  And unbeknown to you, checks are automatically being made in many everyday scenarios, to ensure that you are not one of the perpetrators.

But what is money laundering?

Money laundering is when large amounts of illegally made money, generated by a criminal activity such as drug trafficking or arms sales, is made to appear to have come from a legitimate source. Tax evasion¹ is  money laundering.  Gains from criminal activity are considered to be ‘dirty’ money and the activities undertaken to make it look to be legally gained launders it to make it appear ‘clean’.

The far-reaching impact of money laundering is huge and very real.  It is used to fund modern slavery and human trafficking, drug trafficking, terrorism, drug-related violence, corruption and fraud. It exploits the most vulnerable in society.

Wherever you are in the world, accountants are caretakers of the financial system and the first line of defence when it comes to identifying illegal gains and preventing them from circulating around the economy. At Composure Accounting and Taxation, we have a responsibility to uphold the law and play our part in protecting people.

So what do we do to protect you and Composure from money laundering?

Composure is a member firm of the Institute of Chartered Accountants in England and Wales (ICAEW) and our director is a member of the Chartered Institute of Taxation.  This means that we are held to the highest ethical standards including the Professional Conduct in Relation to Taxation (PCRT). For our duties relating to money laundering, the ICAEW is our supervisory authority ensuring that we follow the anti-money laundering regulations. 

We take our responsibilities very seriously and carry out risk-based assessments in two distinct ways.  The first is to review our firm-wide risk; which involves the appointment of compliance officers and the creation of clear policies and procedures.  We also make sure that all members of our team receive ongoing training and gain an annual certification in GDPR, money laundering and the Criminal Finance and Bribery Acts.

The other prong to our risk-based approach is Customer Due Diligence (CDD).  You might think we are being nosy but the essence of good Anti Money laundering (AML) compliance is knowing your customer.  It is impossible to know if a transaction might be suspicious, if you don’t know what “normal” looks like! 

So, we carry out full due diligence procedures when a new client joins us and ask lots of questions.  After that, we are required to be mindful at all times and have a fully documented revaluation every year, all of which is reviewed by a senior manager.  Many people think CDD is just checking someone’s name and address against their photo ID and a bill, but is goes so much further. 

We have to record details of how we met our client, decide whether the client is a Politically Exposed Person or requires a sanctions check; consider the impact of the client’s location, business activities, and payment methods and especially take into consideration the amount of physical cash changing hands.  It may surprise you that we also have to assess the source of the wealth and funds you have and as part of this, we are even expected to estimate how much your house is worth!

But, it is not just Chartered accountants that should carry out risk assessments, and if your business is one of the following, you should be doing the same:

  • A financial and credit business
  • All accountants, auditors, insolvency practitioners and tax advisers
  • If you are an independent legal professional
  • Estate agents
  • All trust fund and company service providers
  • Casinos

In fact, all businesses have a duty to exercise due care and attention not to be involved in money laundering.  Turning a blind eye is not an option².  What’s more, if you accept or make cash payments of 10,000 euros or more, HMRC consider you to be a High Value Dealer and you are required to register with them³.

It is estimated that the potential scale of global money laundering exceeds 1 trillion USD annually.  Detection and prevention has been made all the harder by online banking and, more recently, cryptocurrencies.

Anybody, or any business, can be impacted by money laundering.  We would recommend that clients always ask their accountant what AML work they do – after all, we are judged by the company we keep.  We recognise that the relationship between us and our clients is based on trust.  A big part of that is that we don’t let them down by failing in our duties to them and to society as a whole.

As Enrique Peña Nieto, former President of Mexico once said “Money laundering is giving oxygen to organised crime.” None of us would willingly, or inadvertently, want do that.

If we sound like the kind of people you’d like to work with, please get in touch.  In the meantime, here’s a few little extra bits of useful information:

¹ Many people think that tax evasion means a complicated scheme but this is not the case.  Something as plain and simple as putting personal costs through your business is tax evasion.

² If you have any concerns and are not sure what to do about them you can get more information here: https://nationalcrimeagency.gov.uk/who-we-are

³ The 10,000 euro limit can apply to multiple payments relating to one transaction; this link will take you to the HMRC guidance https://www.gov.uk/guidance/money-laundering-regulations-high-value-dealer-registration

About the Author
Carolyn Burchell trained with the UK’s top firm of accountants, qualifying as a Chartered Accountant in 1996. Carolyn moved into industry in 1997 working on a number of commercial projects and managing Treasury and Credit functions before taking a career break to have a family. In 2009, Carolyn decided to enter into the stringent Chartered Institute of Taxation examination programme, qualifying as a Chartered Tax Adviser in 2012.

Leave a Reply

*