Money Laundering Professor Nicholas Ryder Bristol University Monday

‘Money Laundering’ Professor Nicholas Ryder Bristol University Monday 29 th January 2018 2 -3 pm 1

Introduction • • • What is money laundering? The history of money laundering The global scale of money laundering How is money laundered? Where does money laundering occur? 2

Introduction • A global money laundering policy • United Kingdom money laundering policy • Recent Developments • Conclusions 3

What is money laundering? • Money laundering is: – the illegal process or act, – by which these individuals or groups attempt to, – disguise, hide or distance them from their illegal activities. 4

What is money laundering? 5

What is money laundering? How is money laundered? • Financial institutions, • Virtual currencies, • Property transactions, • Cash intensive businesses, • Mobile devices, • Cash couriers or money mules, • Professional services providers such as lawyers, accountants and financial advisors Where is money laundered? • • Everywhere! Caribbean, Europe, Asia Pacific, Middle East, Africa, North and South America. 6

The scale of money laundering Global Estimates • Between 2 and 5 % of Global GDP (IMF, 1998), • Between $590 bn and $1. 5 tn per year (FATF, n/d), • $1. 6 tn (United Nations Office on Drugs and Crime, 2009) and • There is no visible data on the amount of money laundered. United Kingdom • Financial Services Authority: £ 23 -£ 57 bn, • HM Treasury: £ 10 bn, • National Crime Agency: £ 36 bn-£ 90 bn, • Harvey between £ 1948 bn, • Transparency International £ 49 bn. 7

A global AML policy • Implementation of international legal AML instruments • Recognition and implementation of international best practices and industry guidelines • The adoption of a risk based strategy • Creation of AML authorities • Criminalisation of money laundering • Mutual legal assistance • Preventative measures • Confiscation of the proceeds of crime 8

International Institutions United Nations • Vienna Convention (1988) – • Palermo Convention (2000) – • Criminalised money laundering of proceeds of drug trafficking Criminalised money laundering of serious criminal offences Corruption Convention (2003) – Criminalised the laundering of the proceeds of bribery and corruption European Union • Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (1990), • the Warsaw Convention (2005) • Four Money Laundering Directives (1991, 2005 and 2015) 9

International Institutions • Established in 1989 • The 40 recommendations are not legally binding • Sanctions can be imposed on countries that fail to follow the recommendations • Remit extended to include terrorist financing since 9/11 (9 Special Recommendations) • Extended in February 2012 to include bribery and corruption 10

The United Kingdom • The implementation of the UK policy is divided as follows: – Primary Competent Authorities – Secondary Competent Authorities – Tertiary Competent Authorities (Ryder, 2012) 11

The UK Legislative Approach • The current money laundering legislation is: – Part 7 of the Proceeds of Crime Act 2002 – Terrorism Act 2000 – Crime and Courts Act 2013 – The Money Laundering Regulations 2017 – Criminal Finances Act 2017 12

Criminalisation Proceeds of Crime Act 2002 • Concealing the proceeds of criminal conduct (s. 327) • Assisting another to retain the benefits of criminal conduct (s. 328) • Acquisition, use and possession of the proceeds of crime (s. 329) Terrorism Act 2000 • Fund-raising (s. 15) • Use and possession (s. 16) • Funding arrangements (s. 17) • Money laundering (s. 18) • Disclosure of information: duty (s. 19) • Disclosure of information: permission (s. 20) 13

The Money Laundering Regulations 2017 • A wide range of institutions must apply customer due diligence measures where they suspect the transaction concerns money laundering or terrorist financing • This means that the firm is required to authenticate the identity of the customer and monitor their business relationships • If a firm suspects that it is being used for the purposes of money laundering, it is required to notify its Money Laundering Reporting Officer (MLRO) • Complete a suspicious activity report (SAR) and file it with NCA, who determines if further action is to be taken 14

The Money Laundering Regulations 2017 What is by knowledge? • Actually knowing something to be true, • Knowledge can be inferred from the surrounding circumstances, • The knowledge must, however, have come to the firm (or to the member of staff) in the course of business How do you define suspicion? • R v Da Silva [2006] EWCA Cro, . 1654. • K v National Westminster Bank, HMRC, SOCA [2006] EWCA Civ 1039. • Shah v HSBC Private Bank (UK) Ltd. [2010] EWCA Civ 31; [2010] Lloyd’s Rep F. C. 276 (CA (Civ Div). 15

The Money Laundering Regulations 2017 • Defensive Reporting: – In 2008, SOCA reported that it had received 210, 524 SARs; – increased to 240, 582 in 2010, – 247, 601 in 2011, – 278, 665 in 2012, – 316, 527 in 2013, • Defensive Reporting – 354, 186 in 2014 – 381, 882 in 2015 – 634, 113 in 2017. – See NCA (2017) 16

Enforcement/Sanctions • FCA have adopted a credible deterrence strategy: – imposing financial sanctions on individuals and firms (s. 206(1) FSMA 2000) and – Prosecutions (s. 402 FSMA 2000) 17

Enforcement/Sanctions MLRO Bank • Michael Wheelhouse was fined £ 17, 500 (October 2008) • Sudipto Chattopadhyay fined £ 14, 000 (May 2010) • Syed Itrat Hussainn £ 17, 500 (May 2012) • Coutts & Company £ 8. 75 m (March 2012) • EFG Private Bank £ 4. 2 m (March 2013) • Standard Bank Plc £ 7. 6 m (January 2014) • Deutsche Bank £ 163 m (January 2017) 18

Recent Developments • Criminal Finances Act 2017 – the ability to investigate the proceeds of crime, – provisions to improve the use of suspicious activity reports (SARs), – obligations to enhance the confiscation of the proceeds of crime, – instruments to tackle the facilitation of tax evasion and – amendments to the counter-terrorist financing legislative (CTF) framework. 19

The Sanctions and Anti-Money Laundering Bill 2017 • The Bill seeks to ensures that when the UK leaves the EU, the UK can continue to impose, update, and lift sanctions and AML regimes. • The UK needs to be able to impose and implement sanctions in order to: – comply with our international obligations, including those under the United Nations (UN) Charter – support foreign policy and national security goals 20

Conclusions • Too many vulnerable governments have not criminalised all forms of money laundering • International cooperation not sufficient • Laws and regulations fail to keep pace with new ways to launder money 21

Suggested Reading • P. Alldridge Money Laundering Law (Hart 2003). • M. Gallant Money Laundering and the Proceeds of Crime – Economic Crime and Civil Remedies (Edwards Elgar 2005). • N. Ryder Money laundering – an endless cycle? A comparative analysis of the anti-money laundering policies in the United States of America, the United Kingdom, Australia and Canada (London 2012), • B. Unger B The Scale and Impacts of Money Laundering (Edwards Elgar 2007), 22

Suggested Reading • Campbell, L. ‘Dirty cash (money talks): 4 AMLD and the Money Laundering Regulations 2017’ (2018) Criminal Law Review, 2, 102 -122, • Herlin-Karnell, E. and Ryder, N. ‘The robustness of EU financial crimes legislation: a critical review of the EU and UK anti-fraud and money laundering scheme’ (2017) European Business Law Review, 28(4), 427446, • Cheung, R. ‘Money laundering - a new era for sentencing organisations’ (2017) Journal of Business Law, 1, 23 -50. 23