Part H Governance and ethical issues relating to business 22: Fraudulent and criminal behaviour 347
This is any conduct that constitutes or would constitute an offence in the UK. In relation to laundering, a
person may have a defence if they make disclosure to the authorities:
As soon as possible after the transaction
Before the transaction takes place
Alternatively, they may have a defence if they can show there was a reasonable excuse for not making a
disclosure.
In relation to failure to report, the person who suspects money laundering must disclose this to a
nominated Money Laundering Reporting Officer (MLRO) within their organisation if it has one, or
alternatively directly to the National Crime Agency (NCA) in the form of a Suspicious Activity Report
(SAR). The NCA has responsibility in the UK for collecting and disseminating information related to money
laundering and related activities. The nominated MLRO in an organisation acts as a filter and notifies NCA
too.
In relation to tipping off, this covers the situation when a person making a disclosure to the NCA also tells
the person at the centre of their suspicions about the disclosure. There is a defence to the effect that the
person did not know that tipping off would prejudice an investigation.
4.3 Penalties
The law sets out the following penalties in relation to money laundering:
(a) 14 years' imprisonment and/or a fine, for knowingly assisting in the laundering of criminal funds
(b) Five years' imprisonment and/or a fine, for failure to report knowledge or the suspicion of money
laundering
(c) Two years' imprisonment and/or a fine for tipping off a suspected launderer.
The money laundering process usually involves three phases:
Placement – this is the initial disposal of the proceeds of the initial illegal activity into apparently
legitimate business activity or property
Layering – this involves the transfer of monies from business to business or place to place to
conceal the original source
Integration – having been layered, the money has the appearance of legitimate funds
For accountants, the most worrying aspect of the law on money laundering relates to the offence of
'failing to disclose'. It is relatively straightforward to identify actual 'knowledge' of money laundering, and
therefore of the need to disclose it, but the term 'suspicion' of money laundering is not defined. The
nearest there is to a definition is that suspicion is more than mere speculation but falls short of proof or
knowledge. It is a question of judgement.
An example of an activity that may help fulfil the requirements of PER 1 is to identify the person or
persons within your organisation that is responsible for providing ethical advice or managing compliance
with relevant legislation (eg money laundering legislation).
4.4 The Money Laundering Regulations 2007
The Money Laundering Regulations 2007 require organisations to establish internal systems and
procedures which are designed to deter criminals from using the organisation to launder money or
finance terrorism. Such systems also assist in detecting the crime and prosecuting the perpetrators.
These regulations apply to all 'relevant persons', a term which covers a wide range of organisations,
including banking and investment businesses, accountants and auditors, tax advisers, lawyers, estate
agents and casinos.
As each organisation is different, systems should be designed which are appropriate and tailored to each
business.