Money laundering – chapter five. The implications of global money laundering laws
| Pages | 189-208 |
| Published date | 15 May 2007 |
| Date | 15 May 2007 |
| DOI | https://doi.org/10.1108/13685200710746893 |
| Author | Rowan Bosworth‐Davies |
| Subject Matter | Accounting & finance |
Money laundering – chapter five
The implications of global money
laundering laws
Rowan Bosworth-Davies
SAS International, London, UK
Abstract
Purpose – The purpose of this chapter is to look at the implications of the laws which are designed to
prevent and forestall money laundering and how they impact upon relevant industry sectors.
Design/methodology/approach – The paper looks specifically at the implications of the word
“suspicion” and whatthey really mean. It examines the context of “suspicious transactiondisclosures”
and reviews the ways in which the UK Government is seeking to change the terms of engagement
intorequiring “suspiciousactivity reporting”.The paper also looks at how potentiallysuspicious activities
can be disguised by the professional money launderer, in ways which spell danger for financial
institutions.
Findings – If government wishes to introduce regulatory change, then it should do so openly,
transparently and in the full glare of publicity, and provide a full opportunity for the issues to be
debated by parliament, and not seek to slide it onto the statute books using underhand methods.
Originality/value – The paper offers insights into the implicationsof global money laundering laws.
Keywords Money laundering,Laws, United Kingdom
Paper type Viewpoint
In this chapter, we shall look at the implications of the laws which are designed to
prevent and forestall money laundering and how they impact upon relevant industry
sectors. We shall look specifically at the implications of the word “suspicion” and what
they really mean; we shall examine the context of “suspicious transaction disclosures”
and review the ways in which the UK Government is seeking to change the terms of
engagement into requiring “suspicious activity reporting” (SAR); and we shall also
look at how potentially suspicious activities can be disguised by the professional
money launderer, in ways which spell danger for financial institutions.
By far the most important issue to confront right at the start of this discussion is the
sheer cost of the new regulations which are being introduced and with which the
financial sector has to grapple.
In operational risk terms, the significant point from the perspective of the regulated
sector is the increasing cost of compliance with money laundering legislation, when set
against the measurement of the size of the risk. Without meaningful evidence or data
which will enable practitioners to measure the quantum of risk they are being required
to manage, they have significant difficulties in determining the amount of money they
should be spending on “best practice” compliance procedures. When bankers are asked
to spend money, they always examine their risk/return ratio. If those requiring them to
spend, cannot quantify the risk they have to balance, then it gets very much harder to
get their agreement. None of the statistics presently in the public domain give any
meaningful assistance to a real understanding of the size of the money laundering risk.
Asking banks to help in preventing the onward movement of drug profits is one thing.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
Money
laundering –
chapter five
189
Journal of Money Laundering Control
Vol. 10 No. 2, 2007
pp. 189-208
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685200710746893
Trying to get financial managers to get too excited about assisting government to be
more effective in making tax recoverables, is not a “hearts and minds” winn ing
argument.
The money laundering debate will not be won by government merely pushing more
and more regulation at the regulated sector, without a significantly greater degree of
cooperation and partnership with them. Eventually, the ability of legitimate financial
managers to conduct business will become so hidebound by meaningless and
burdensome regulation that their clients will look elsewhere for business offerings
which provide the line of least resistance. This facility will be offered by the criminal
sector, which does not give a fig for rules, laws or regulations, and will be willing to
offer an alternative service, at a cost naturally, but a service which will be anonymous,
secure and desirable.
As with the failure of the experiment of alcohol prohibition, which merely made
millionaires of a number of small-time hoodlums, and created the environment within
which organized crime would begin to cement its hegemony in North America; and
with the failure of the so-called war on drugs, which has led to the narcotisation of so
many of America’s inner cities, and has provided another generation of criminals with
the means of becoming wealthy beyond the dreams of avarice; so the new war on
money launderers will merely push more and more money into the hands of those who
are the very individuals the legislation is supposed to interdict, and this latest “noble
experiment” will merely have the effect of enriching yet another generation of
criminals.
In an article I wrote for Complinet in July 2003 entitled “Putting some sense back
into the crime figures” I ventured the view that it was about time government began to
respond to the needs of the regulated sector and gave them some empirical evidence on
which to base their compliance response:
...My last article drew attention to the vagueness and wholesale inaccuracy of the values of
criminal activity with which practitioners in the regulated sector were expected to deal. I
made a strong and frankly, fairly insensitive point that the paucity of empirical information
available to determine the size and the scope of the criminal values available to be laundered,
was causing significant difficulties for the regulated sector.
It is making it very hard for them to be able to judge the effectiveness of their compliance
procedures, because they have nothing with which to compare the level of investment they
are putting into their compliance regimes, in terms of the effectiveness of detection and
prosecution of criminal offences, arising out of information gleaned from disclosures. I
asserted that the lack of knowledge of the size of the criminal asset values in circulation was
permitting the law enforcement authorities to speculate on the size of the monies at risk,
resulting in statistics of dubious value and incredible disparity.
So, in an attempt to try and put some sense back into the debate, I sought to find some
available statistics which would enable us to draw a more realistic picture of the scope of the
problem.
Turning first to the proceeds of predatory crimes, I looked at those financial crimes which
would be classed as classic examples of the genre, to see if I could obtain any meaningful
statistics. Such crimes include theft, burglary, credit card fraud, robbery, theft of and from
motor vehicles, and fraud.
It is posited that by far the greatest percentage of the proceeds from these crimes are
merely spent, immediately upon their acquisition, to support the lifestyles of their
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