Money laundering – the current situation
In early November, the National Crime Agency (NCA) led a co-ordinated multi-agency crackdown on Organised Crime and money laundering on the high street. This action is a vital step in the right direction.
The press release stated some impressive stats around the outcomes. 2734 premises raided, 924 individuals arrested and over £10.7m of suspected criminal proceeds seized. Over £2.7m worth of illicit commodities destroyed.
Some consider this to be tip of the iceberg. Particularly considering the same article suggests that at least £12bn of criminal cash is generated in the UK each year. However, any action to take drugs, guns, fake goods and the proceeds of crime off our streets is to be applauded.
Sal Meiki, the Senior Lead at the NCA responsible for the operation, said: “they do not underestimate the aggregated effect that thousands of shops engaged in so-called lower level criminality is having on our communities and the criminal supply chains that profit from them”.
Why this matters
For the last decade or so, the spotlight has been very much been on so-called “high-end” money laundering, kleptocracy and the Eastern European oligarchy.
It appears that this focus may be slowly turning. Government and law enforcement are starting to recognise the extent, threat and socio economic impact of cash based money laundering across the UK. Indeed, the NCA is starting to tie in all together.
We are seeing more and more mainstream media coverage of this also, which will in turn raise public awareness. The BBC recently published articles about raids on barber shops, vape shops and car washes, along with headline stories about the connection between drug dealing, cash intensive businesses and Russian criminal networks.
Why cash-based money laundering is important for law firms
Cash-based money laundering is a key threat the vast majority of high-street firms should be concentrating on. It’s why I rated high risk business sectors and cash intensive businesses as a high risk in the 2022 Scottish Legal Sector AML Risk Assessment, published by the Law Society of Scotland.
The NCA states that the majority of high street businesses are legitimate, although if you walk through many town centres you could be forgiven for thinking otherwise.
The legal sector is inevitably involved in the buying and leasing of commercial premises related to such shops or businesses. In the vast majority of cases, this involvement will of course be wholly inadvertent. Even so, they could bring untold reputational and regulatory damage, and in some situations, criminal consequences.
How do you separate the legitimate from the potentially illegitimate?
Firstly, reference and take on board available literature and information. Read the BBC articles, go through the list of higher risk sectors and businesses in the aforementioned LSS risk assessment (pages 9 & 10).
Where a client or matter exhibits any or several of the risk factors as outlined in the sectoral assessment or LSAG guidance, do that extra bit of due diligence . Look further into their expected business plans and cash flows and source of their funds. Then marry this to the wider context and background of the client and your community.
Yes, there are rigorous legal obligations on solicitors in terms of anti-money laundering. And yes, these obligations can be onerous and sometimes feel “over the top”.
The vast majority of clients will be straightforward. In that case, my guidance would be to fulfil your legal obligations quickly. Ideally do this with the help of dedicated software such as the Amiqus platform – and go on to do the business.
Then spend more of your time doing a bit more digging on the edge cases. The ones which present higher risk factors or red flags as described in the literature. The ones you’re just not sure about or can’t quite get comfortable with. In each case, record what you’ve done to get comfortable, or not, as the case may be. The very essence of a risk-based approach.
The “why’s”
It’s important that everyone know the “whys” behind the anti money laundering rules. Perhaps share press articles around the practice and discuss the themes which might affect the business. This in itself is a form of effective training, and also shows awareness that you take AML seriously.
Making it real to people. The “whys” are a core constituent whenever I conduct training or support firms with AML. When people understand why these rules exist – to prevent real-world harm, often on their doorstep, in their local community and on their high street – they stop being just rules to follow. They become something to get behind. Good AML control starts to make sense and embed into the everyday. Your people become your most effective line of defence.
Also, don’t forget your duty to report suspicious activity should you have enough information for concern to crystallise into suspicion. These are really important. I know from experience SARs don’t just go into a black hole.
Let’s go back to those recent NCA operations. They simply wouldn’t have achieved what they did without the intelligence sent in and held on the NCA’s Suspicious Activity Reporting database.
Written by Graham MacKenzie, Director of AML and Economic Crime Risk
