Money laundering – chapter three
| DOI | https://doi.org/10.1108/13685200710721863 |
| Date | 09 January 2007 |
| Published date | 09 January 2007 |
| Pages | 47-65 |
| Author | Rowan Bosworth‐Davies |
| Subject Matter | Accounting & finance |
Money laundering – chapter three
Rowan Bosworth-Davies
SAS International, London, UK
Abstract
Purpose – The paper seeks to provide an alternative and possibly controversial examination of the
contemporary anti-money laundering regulatory phenomenon. It is intended to challenge existing
givens and to pose an alternative and challenging view of the reasons and the motives behind the
imposition of the international laws and regulations dealing with money laundering.
Design/methodology/approach – The paper contains the views of one man who has spent most of
his working life examining the money laundering question and it is a single alternative view based
upon personal experience.
Findings – The findings are not enunciated in the sense that there are research outcomes. It is a
question for the reader to interpret and accept or reject the writer’s viewpoint.
Practical implications – The paper seeks to encourage a more questioning and agnostic view of
current anti-money laundering practice, with the aim of stimulating more debate on a topic which has
for too long been the captive of a small coterie of government agencies.
Originality/value – The paper is challenging in that it represents a complete counter-blast to every
accepted conventional wisdom on money laundering. It is a viewpoint piece.
Keywords Money laundering,Laws, International finance
Paper type Viewpoint
Within a few months of the newanti-money laundering regime having beenintroduced,
the battle-linesbetween the law enforcementagencies and thefinancial sector had already
been firmly drawn in thesand. As I said in the last chapter, the concerns centred around
the meaning of the threewords “suspicious” “transaction” and “disclosure”.
Put at its simplest, the dispute arose around the number of suspicious disclosures
that were being made by the regulated sector to NCIS, the FIU, and in return, the
quality of “feed-back” which was largely not being provided by the police intelligence
agency in return.
There was a considerable degree of misunderstanding among both the financial
sector as well as the public as to the nature of the responsibilities under the legislation,
for reporting suspicious transactions. The law applied to every citizen in the UK, but
the generally-held view was that the only persons who were required to make
disclosures were those within the regulated sector, and those were defined as persons
and entities which were regulated in the conduct of investment business by the
Financial Services Act 1986.
The regulated sector was defined by that group of individuals to whom the money
laundering regulations applied, and who had extra responsibilities to appoint an
MLRO, ensure that they maintained effective record retention policies, train their staff
in an appropriate manner, demonstrate that they could identify their clients, and
generally comply with the regulations.
The police began to become concerned at the paucity of the level of disclosures
being made to them, and the word began to spread among the law enforcement
agencies that the financial sector were not really taking the problem of disclosure as
seriously as they should.
The current issue and full text archive of this journal is available at
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Money
laundering –
chapter three
47
Journal of Money Laundering Control
Vol. 10 No. 1, 2007
pp. 47-65
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685200710721863
It was rapidlybecoming clear, from an analysisof their statistics that disclosures were
only being made by a selectedgroup of practitioners. It was also becomingmuch clearer
that one of the reasons behind the lack of urgency seemingly being expressed by the
financial sector was that no-one among the financial regulatory sector appeared to be
willing to takeon board the responsibility to graspthe nettle of ensuring compliancewith
the money laundering regulations, or indeed, check, during a routine compliance visit,
what their regulatedmembers were doing with regard to the anti-moneylaundering law.
The law,to all intents and purposes,was being routinely flouted,by both the vast majority
of the regulated sector,and routinely ignored by their regulators.
In a report I wrote for the UK’s contribution to the Financial Action Task Force’s
annual methodology report in 1998, I reported a series of quotations from city
individuals I had interviewed for the purposes of gathering background information
for the document. Their observations were quite clear, and throughout my interviews,
the same phrases kept re-appearing from those I interviewed:
These laws cannot be that serious, no-one bothers to enforce them! (LIFFE market local).
I can’t remember anyone asking me to show them any evidence of my client identification
procedures. It’s as if they don’t want to know! (Futures trader with small specialist broking
company).
I think if somebody went to prison, we’d all sit up and take notice. But the fact is that nobody
wants to see London lose its place in the world market, and they certainly aren’t going to start
worrying about a bit of funny Russian money coming in! (LIFFE floor trader).
I do ask to see evidence of client identification, but if I am told that the introducing broker has
done his homework, as long as someone is happy to sign off on that, then it’s none of my
concern. I don’t get paid to turn away business (Medium-sized broker’s compliance officer).
If the regulators started getting heavy with us about the regs, we’d comply a bit better. Not a
lot though, because they are all crap! As it is, SFA don’t give a damn! They never ask to see
the paperwork, all they care about is seeing the right signatures on the right forms. Most of
them are so dumb, they wouldn’t know what they were looking at, anyway (Young desk
trader in a busy futures’ dealing operation).
Of course I am laundering money. I’ve got to be. Nobody does these kinds of trades in this
time scale, and at these volumes, and loses as much money as some of these guys do, without
having a reason for doing it. Anyone can get on the wrong end of a trade, from time to time,
but you make damn sure you don’t make the same mistake again. These guys are just moving
around huge sums of other people’s cash, and they are willing to pay for the privilege (Forex
dealer in a small private client firm).
Look, if anyone asksme, I’ll deny I said this to you on a stack of bibles,but what do you think
we do for a living. Someonewants to move some money, and I am there tohelp them. It doesn’t
happen all the time, most times we’re just taking positions. Anyway, all this stuff you are
asking cannot be that important, even the regulators don’t ask about it (Same Forex dealer).
What became abundantly clear in the interviews was that there was a general
acceptance that the money laundering regulations were not only not being enforced,
but that those with responsibility for their regulation, the Securities and Futures
Association, did not seem to care about their enforcement. Whether or not the SFA
accepted that it did have regulatory responsibility for the enforcement of the provisions
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