United Kingdom: Current and Future Strategies for Tackling Money Laundering
| DOI | https://doi.org/10.1108/eb027193 |
| Date | 01 January 1999 |
| Pages | 279-286 |
| Published date | 01 January 1999 |
| Author | Simon Willis |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control —
Vol.
2 No. 3
United Kingdom: Current and Future Strategies for
Tackling Money Laundering
Simon Willis
INTRODUCTION
What is money laundering? Why should Finance
Ministries and international financial institutions,
such as the IMF and the development banks take it
seriously? Why does it matter to the City and the
financial regulators? How do we improve feed-
back, and level the playing field domestically and
internationally? Why is tax evasion such a critical
question for money laundering sytems — even if
no one cares about people not paying their taxes?
WHAT IS MONEY LAUNDERING?
The growing sophistication of the specialists work-
ing in this complex area is bringing both useful
insight and an analytical depth that has often been
lacking in the formation of policy on the preven-
tion of money laundering. But there is a risk that
the subject might be turned into another technical
subculture; a specialist club or game with complex
rules,
obscure allusions and exclusive language. To
some extent this development is inevitable but
continual care is needed not to lose sight of the
reality of what is being dealt with.
Serious and organised criminal activity is illegal
business. This economic activity may be thought
of as falling very roughly into two categories: ille-
gal trade and illegal
transfer.
Illegal trade usually
occurs between consenting adults: the illegality
arises from the nature of the good or service being
traded. Illegal transfer is not consensual and the act
of transfer defines the illegality. Illegal trade
involves goods and services such as some drugs,
some nuclear materials and other weapons, certain
forms of prostitution and pornography, facilitating
illegal immigration and counterfeiting to name a
few. Illegal transfer activity includes theft, tax
evasion, fraud, bribery, insider dealing and other
market abuses, and other forms of diverting money
from its legitimate owner by force, fraud or decep-
tion.
It is particularly useful to bear this distinction in
mind when analysing the stages of laundering.
Much effort has focused on cash 'placement' but it
is necessary to remain alert to the challenge of
detecting non-cash placement and this is particu-
larly relevant to tackling illegal
transfers
where the
criminal assets rarely materialise as cash but more
often appear as book entry credits to the benefit of
the transferor. A broker who is holding the pro-
ceeds of a suspected insider trade and receives
instruction to pay them offshore is faced just as
surely with the risk of committing a laundering
offence under UK legislation as the banker hand-
ling a one-use cash deposit account.1
The scale of these various illegal business activi-
ties is not just unknown but perhaps intrinsically
unknowable. Global estimates of illegal profit (as
opposed to turnover) vary between US$500bn and
US$1.5trn. It probably represents up to 5 per cent
of GDP of the average country with much varia-
tion.2
Money laundering in its broadest and most ill-
uminating definition is all financial activity
between these illegal business sectors on the one
hand and the rest of the economy on the other.
The key relationships are with the financial sector,
the property sector and the professional service
providers such as laywers, accountants, trust ser-
vice providers and company formation agents.
The word 'laundering' may mislead. The pro-
cesses we are interested in are those by which
criminal profits are controlled and converted,
stored, transported or transferred, managed,
obscured, anonymised, invested, enjoyed. Tradi-
tional analysis distinguishes the stages of place-
ment, layering and integration. This is useful but
more sophisticated distinctions may sometimes be
required, particularly where an emphasis on cash
placement may obscure more than it reveals.
ELEVEN CONTROL STEPS
(1) Convert through redenomination (exchange
to high denomination notes, universal
denomination notes)
(2) Convert through dematerialisation (cash
placement)
Page 279
To continue reading
Request your trial