Money Laundering

Introduction

Much has been written about money laundering over the years. Did the expression “Laundering” really come about because Al Capone filtered his ill-gotten gains through his cash generating launderettes, who knows? What we do know is that most criminals are motivated by profit and the aim of the recent legislation in the UK is to take the profit out of crime and make every effort to dismantle and disrupt the criminals who reach far and wide into all our lives.

The following article was written by a Detective from the SCD6 Economic and Specialist Crime , it reflects on the effect it could have on the bank employee who becomes innocently embroiled. Many countries have or will have legislation similar to that in the UK so you can transpose the country of the bank employee to your own location.

This is a true story…

“The street or career criminal will look upon a visit to the interview room of a Police Station as merely representing an occupational hazard, another part of the process en route to either being released or charged. Habitual criminals even know the Police caution at the start of the interview, sometimes better than the Policeman administering it does. They know what to expect.

But to those people, who ordinarily would not come to the notice of Police in circumstances where they are interviewed as a suspect, they don’t know what to expect. The interview room can be a lonely and forbidding place, even though a legal representative may accompany them. Such rooms are never as big as they appear on television’s ‘The Bill’. They’re always windowless and soundproofed in order to enhance the quality of the tape recorder, which will record the interviewer’s questions and the suspect’s answers. No pictures of The Queen, or even the current Commissioner, adorn the walls. This removes the potential for the suspect to distract himself or herself.

The Banker fell squarely into the latter category. He’d progressed well with the major UK Bank who were his employers and they had recognised his potential by elevating him to management a few years earlier. His role carried status and responsibility and he was adept at fulfilling the performance targets set by senior management.

I first met him in the foyer of the Police Station, though I’d spoken to him by telephone several days earlier, inviting him to come and see me about a business account he had been responsible for opening at the branch. He knew the interview was going to be different, because I’d advised him to make sure he brought a Solicitor with him to represent his interests. I reinforced this by also speaking with his line manager to make sure the Solicitor became a reality.

In the days leading up to our meeting, I can imagine there were times when he found himself under stress. He would have taken it home as well and unintentionally shared it with his family. There would have been meetings with senior managers and lawyers, all asking questions and probably giving few answers. And then there was me, somebody who was investigating money laundering. There were probably a lot of questions he wanted to ask me in order to prepare mentally for the interview, but he had to wait. This was not my choice, but rather his employers.

I led him into the interview room and we sat down, followed by his Solicitor and another detective. With four of us in the room, the room became infinitely smaller. One more and it would have been positively claustrophobic. I could see the Banker was nervous, but there again, why wouldn’t he be, the interview had finally arrived. He constantly rubbed his hands, a thin film of sweat glossed his forehead and he wanted to look at everything else except me, but there was nothing to look at. His mouth would have been dry and his mind racing, trying to recollect what he wanted to make sure he said during the interview. Time to settle him down, to relax him.

The other detective went off to the canteen to get the coffee, during which time the Banker and I made small talk. This would dispel some of the more uncomplimentary interpretations he would have of me. The coffee arrived and we inserted the tapes into the tape recorder, the interview had begun. I introduced myself by name, followed by my colleague. The Banker then introduced himself, followed by his Solicitor. I had reasonable cause to suspect the Banker had been involved in Money Laundering and by law, I must caution him in accordance with the Police and Criminal Evidence Act 1984. “You do not have to say anything. But it may harm your defence if you do not mention when questioned something which you later rely on in court. Anything you do say may be given in evidence”.

I then explained that my unit, Scotland Yard’s Money Laundering Investigation Team, had been investigating the money laundering activities of career criminals. We had identified one particular audit trail representing the proceeds of crime that had transited a business account at the Banker’s branch. Having obtained a Court Order to look at the account, we noted that several million pounds had gone through it. We immediately recognised virtually all the monies had the hallmarks of a particular type of fraud and therefore also represented the proceeds of crime. As part of the investigation, we focused on the ‘account opening phase’ and saw the Banker had conducted the initial interview with the customer and authorised the account to be opened.

Of major concern to us, was that proof of the customer’s identity had never been established. When looking at the ‘account opening’ phase, there were ‘red flags’ indicative that the account was going to be used for laundering the proceeds of crime and the number of ‘red flags’ multiplied during the ‘account operation’ phase. Despite the Banker writing to the customer several times, the customer at no time provided proof of identity, even though he visited the Branch on a later occasion and met with the Banker for that very purpose. We also noted that the Banker only chose to make a ‘Suspicious Transaction Report’ to his Money Laundering Reporting Officer, the day after he knew my officers were in the process of applying for a court order to investigate the account for money laundering.

For all those reasons, I told the Banker I had reasonable cause to suspect he had knowingly, or suspected that he had, entered into an arrangement to launder the proceeds of crime. I also suspected there was a breach of Regulation 5 of the Money Laundering Regulations 1993 in that no proof of identity had been established, thereby defeating the “Know Your Customer” requirements of the Regulations.

The interview lasted for three hours, though there were short breaks in between changing tapes. I first dealt with the primary Money Laundering offence and quickly came to the conclusion that, he neither knew or suspected the account was going to be used for money laundering. Therefore, no offence committed.

The possible breach of Regulation 5 was more interesting and certainly revealing. I’d carefully structured the interview to cover all the facets of the role of a Banker in his position, together with the account ‘opening’, ‘operation’ and ‘closing’ phases. The ‘account closing phase’ I found rather humorous because the customer had written in to say he was closing the account and would be recommending the Banker to all his friends and business associates. This guy had irony and a good sense of humour, which appealed to me.

Part of the interview strategy allied to investigating the role of the Banker, naturally focused on the Anti – Money Laundering training he had received from his employers. This I found worrying and to be perfectly frank – alarming.

Q. How many times have you received Anti – Money Laundering training from the Bank?
R. Twice.
Q. Over what period?
R. 10 years.
Q. Only twice in 10 years?
R. Yes.
Q. In what form did that training manifest itself?
R. Staff at the branch would get together for 10 minutes and we’d watch a video.
Q. Tell me about the story line in the video?
R. A guy walks into the Bank and starts paying cash over the counter.
Q. Not the one where he turns out to be the owner of the visiting Circus?
R. Yes, that’s the one.
Q. What was the story line in the other video?
R. It was the same video.

Should he have opened the account – No, the warnings or ‘red flags’ as we call them were there from the start. Should he have recognised the ‘red flags’ – Yes, but then again, what chance did he stand with the derisory level of Anti-Money Laundering and “Know Your Customer” training provided by his employers. By virtue of his position, the policy of his employers and industry guidance notes was that he could authorise the account to be opened.

All well and good, but at least train the staff or equip them with the skills to do the job, thereby enhancing their professionalism and protecting the reputation and integrity of the Bank. The Banker was sat in the interview room that day because he had made a series of mistakes, but more importantly, his employers must share responsibility for him making those mistakes. Sadly, it is one of several stories that I could relate.

The conclusion to this particular story was that we did not prosecute the Banker for breaching Regulation 5 of the Money Laundering Regulations 1993. No further action was taken. Had the proceeds of crime in this case been drug related, then it is possible we could have prosecuted for ‘Failing to make a Suspicious Transaction Report’ contrary to the Drug Trafficking Act 1994.

If the above circumstances manifest themselves after the introduction of the Proceeds of Crime Act 2002, then a LEA Money Laundering investigator will certainly gives serious consideration to prosecuting the Banker for such an offence. In addition there is a real prospect of the employers being reported to the Financial Services Authority as Regulator for a breach of their training responsibilities under the Financial Services and Markets Act.

The concealment of wealth has been going on for centuries. Only in the latter part of the 20th Century did we start referring to it by the term Money Laundering. Law Enforcement Agencies recognise that career criminals alone, cannot launder their proceeds of crime. They place a heavy reliance upon others to launder the proceeds for them. Aside from relatives and friends who are involved in the basic schemes, this has led to the creation of a new breed known as the professional criminal, who will have a business or professional service providers background and knowingly participates in the laundering cycle. In Britain they will be exposed to arrest, prosecution and conviction through the medium of primary Money Laundering legislation, i.e. The Proceeds of Crime Act 2002.

The unwitting professional and their employers who become involved in the laundering cycle, on occasions, may be exposed to the secondary Money Laundering legislation. This would include The Money Laundering Regulations 1993, 2001, the new Regulations currently being drafted in response to the Second EU Money Laundering Directive and The Financial Services & Markets Act 2000.

Based on experience, 75% of all accounts my Team and I investigate, which have been used in connection with laundering the proceeds of crime, the ‘red flags’ clearly existed at the ‘account opening’ phase. If staff can be trained to recognise those ‘red flags’ and understand the risks that they themselves are exposed to, there exists the potential to make it far more difficult for criminals to launder criminal proceeds through the financial services sector.

Therefore, I firmly believe that training in the Financial Services Sector in all countries can have a major impact in the international fight against the concept of Money Laundering. Elements of the UK Sector must now have training regimes focused toward reducing and preventing financial crime. A robust training policy will also be a key factor in protecting the reputation and integrity of a Financial Services Provider”.