Dirty Money: How the UK Securities and Derivatives Markets are Used to Launder Money
| Date | 01 February 2001 |
| Published date | 01 February 2001 |
| Pages | 309-319 |
| DOI | https://doi.org/10.1108/eb027281 |
| Author | Sanjay Sharma |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 4 No. 4
Dirty Money: How the UK Securities and Derivatives
Markets are Used to Launder Money
Sanjay Sharma
The increasing publicity of recent high-profile
money-laundering cases has propelled this apparently
victimless crime into the forefront of the public
domain. However, although this has been one of
the government's principal aims — to increase
public awareness — there is still a lack of common
knowledge within the public domain of what consti-
tutes a money-laundering offence. The job is further
complicated by the fact that this invisible crime oper-
ates on the fringes of society, acting as a bridge
between the underworld and the rest.
The fact that it appears victimless and has a tenuous
link with the violence and fear commonly associated
with crime makes the task of policing this problem
harder. It has also ensured that the crime remains
largely subordinated and trivialised within the
public eye. After all, what sells more newspapers
and media time? The story of how the crime was
committed or the aftermath, relating to how the
proceeds were laundered?
Ultimately the reality is different. Large criminal
operations spanning the spectrum of organised
crime from drug trafficking to other illicit activities
rely on this activity for their continued survival.
It is estimated that $2.85trn in proceeds from illegal
activities is laundered each year.1 It is to a large
extent the umbilical cord that connects the criminal
activity to the perpetrators and allows the
criminal to continue operating and growing. Sever
this link and the stability of the organisation is
threatened.
Hence, like any living organism, the criminal will
seek to preserve and protect the operation as
vehemently as the actual criminal activity
itself.
This is to a large extent the invisible enemy which,
if exposed, could be the key to fighting criminal
organisations globally.
This paper will concentrate on what is surely
one of the largest potential, if not actual, sinks
for criminally derived profits in the world: the
UK capital markets. It will attempt to identify the
increasing use of the financial markets, with specific
reference to London, to launder money.
DEFINITION
Money is the lifeblood of all domestic and inter-
national organised crime groups, regardless of
whether their activity is drug trafficking, arms smug-
gling, terrorism or white-collar crime. The proceeds
of crime are recycled through the financial system to
disguise their origins and to make them appear to be
legitimate. Despite there being no single definition of
money laundering, the majority focus on the
common element of the transfer of illegal revenues
into the official economic system.
The legislative definition offered by Article 1 of
the EC Directive of March 1992 defines money
laundering as:
'The concealment or disguise of the true nature,
source, location, disposition, movement rights
with respect to, or ownership of property, know-
ing that such property is derived from serious
crime.'
The accepted US definition, drafted by the US
Senate Sub Committee on Narcotics and Terrorism,
offers a more concise definition:
'Money laundering is the conversion of profits of
illegal activities into financial assets which appear
to have a legitimate
origins.'3
The ability to integrate ill-gotten gains into the
economic system without detection is the launderer's
skill. A successful laundering operation will allow the
criminal to maintain control over his/her proceeds
under the guise of a legitimate business transaction.
By weaving an intricate web of transactions the aim
is to conceal the link between the criminal activity
and the funds. Ultimately the laundering mechanism
seeks to help those who wish to conceal any sudden
increase in wealth from the relevant authorities, be
they the government, police or other agency.
The technological revolution and liberalisation of
financial systems have increased the opportunities and
methodologies dramatically. As detection techniques
Journal of Money Laundering Control
Vol.
4,
No.
4,2001,
pp.
309-319
© Henry Stewart Publications
ISSN 1368-5201
Page 309
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