Recognising and Reporting Money Laundering: How Well Should You Know Your Customer?
| Date | 01 February 2000 |
| Published date | 01 February 2000 |
| DOI | https://doi.org/10.1108/eb027245 |
| Pages | 317-324 |
| Author | Andrew Jackson |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 3 No. 4
Recognising and Reporting Money Laundering:
How Well Should You Know Your Customer?
Andrew Jackson
HISTORICAL PERSPECTIVES
Money laundering is as old as the hills. It simply
has not always been dignified with such a grand
title.
The reason why, in the year 2000, groups of
lawyers, bankers, regulators, policemen and other
professionals can actually sit at a conference dis-
cussing this phenomenon is simply because as time
has gone by the sums involved have increased
dramatically and the world's financial services
have become more and more complex.
In a famous war-time scenario there was a meeting,
circa 1940, between the captain of the local Home
Guard and a fine upright Army colonel. The two
men were known to each other and clearly respected
each other. The meeting took place in a local bank of
which the Home Guard captain happened to be the
manager. At the end of the meeting, the colonel
went to leave, but on his way out decided to cash a
cheque. The cheque was handed to the captain who
by now had reassumed his role as bank manager.
'Do you have an account with us?' he asked. 'No',
came the reply. 'In that case then I'm not prepared
to accept this cheque — you could be anybody.'
It's an old story, and like all such stories probably
has a ring of truth about it. However, what it docs
represent very well indeed is an early illustration of
the principle of 'know your customer'. But then
money laundering as we know it today was virtually
unheard of. The good bank manager would not for
one minute, in refusing to cash the cheque, have
thought that his customer might be a criminal.
Perhaps the case which began to bring the concept
of money laundering to the fore — because of its
sheer size — was the Great Train Robbery. In 1963
a gang of men held up a train and stole over
£2.5m in used bank notes. At the time this was a
massive amount of money. Unfortunately for the
robbers, financial and banking systems then were
not such as to lend themselves to clever money-
laundering schemes. It is conservatively estimated
that some £30,000 was lost because hidden notes
actually went mouldy and rotten! Of the £2.5m
however, only £250,000 was recovered. Apart
from that which went rotten and was stolen by
other thieves the rest was 'invested', mainly in
property and cash-based businesses.
One example will suffice. Of the £150,000 taken
by one of the robbers, Gordon Goody, it is estimated
that it was used in the following way:
Out-of-pocket, prison and family
expenses
Stolen
Invested in property, bookmakers and
other 'cash' businesses
Legal defence expenses
£32,500
£40,000
£47,500
£30,000
The last entry is perhaps of some interest!
The next 20 years saw great leaps forward in the
financial and banking networks. Credit cards and
credit generally came to be quite freely available.
Offshore financial centres grew, and where once the
top criminals were bank robbers, they soon became
involved in drugs smuggling where the rewards
were huge. So by 1983 when three men, and an
accomplice on the inside, robbed the Brinks Mat
security warehouse at Heathrow, stealing gold
bars with a value of £26m, the scene was set for
the UK authorities to witness large-scale money
laundering.
The gold having been stolen, what to do with it?
At this point some very experienced launderers
became involved. The stolen gold was smelted to
remove identifying marks and through middlemen
in London was sold to a company in Bristol called
Scadlynn. It was paid for in new £50 notes. The
gold was then resmelted with small amounts of
copper or zinc and sold on to the open market as
scrap at suspiciously low prices. Payments were
received in cash and over a five-month period some
£10m in cash was deposited into the company's
bank account at a branch of Barclays near Bristol.
In the preceding years, the company had been trading
in no more than tens of thousands. Naturally the
money did not stay there. During that period,
Scadlynn staff visited the bank on a daily basis,
withdrawing an average of £20,000 per day in
cash. Barclays actually recruited extra cashiers to
Journal of Money Laundering Control
Vol.
3,
No.
4,
2000,
pp.
317-324
© Henry Stewart Publications
ISSN 1368-5201
Page 317
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