Money launderers are ready, are you ?

Thousands of businesses will be expected to comply with new money laundering reporting regulations on 1 March 2004, but they may not even know it. The security industry needs to prepare for the new rules, but it could also mean new business.

By Vic Stephens

Since the days of the Mob’s accountant Svengali Meyer Lansky, money laundering has been the bete noir of law enforcement bodies around the world. To combat the problem of tracking down criminal funds, governments have pursued ever more rigorous legislation to catch the launderers in the act. The latest comes into effect in the UK on 1 March, and companies unaware of its guidelines could find their staff facing fines or prison sentences.

But what poses a problem for some companies could be a boom to the security industry, particularly if they are up to speed on how to comply with the new rules.

A last minute amendment to the Money Laundering Regulations 2003 will require thousands of additional companies to comply with this legislation (not just banks and financial organisations).

Together with the Proceeds of Crime Act 2002, this is perhaps the most significant development in the criminal law since the incorporation of the European Convention of Human Rights in 1998. It has far reaching consequences in criminal procedure.

The new obligations require accountants, lawyers, casinos and high value goods dealers (a complete list is available from the Treasury web site) to appoint a money laundering reporting officer, train staff to understand the meaning of money laundering and ensure that staff are aware of the duty to make suspicious activity reports (SARs). Security professionals might well be delegated the duties of a reporting officer and are ideally placed to assist.

Additionally, companies involved in the provision of ‘services in relation to the formation, operation or management of a company or trust’ will now be included by the regulations. This could involve any service company like accountants and solicitors - particularly those involved in property conveyancing - and other professions where some might have turned a ‘blind eye’ in the past or where criminals are prepared to use intimidation. Other businesses affected include estate agents, casinos and various high value goods businesses. Bookmakers are included too as they offer frequent high-stake bets at low odds that give a minimal profit, helpful for the criminal launderer.

Company directors and designated staff could face up to 14 years imprisonment for failing to comply with the regulations.

The threat of non-compliance has already spurred the establishment of one new security company: RISC Global, led by Cliff Knuckey, the founder and former head of Scotland Yard’s Money Laundering Investigation Unit. Knuckey has launched a specialised service for companies in newly designated sectors who must now comply with money laundering regulations as of 1 March 2004.

“As anti-money laundering measures in the financial sector have become more robust, criminals have been turning to the unregulated sectors where large transactions were processed with little oversight. That is, up to now,” said Knuckey.

A Detective Inspector with more than 30 years experience, Knuckey set up and led Scotland Yard’s Money Laundering Investigation Team. During his tenure, the team recovered nearly £80 million in criminal assets.

Now Knuckey is using his experience to help firms - particularly small to medium sized companies in the newly regulated sectors - combat money laundering. While the regulations are quite complex and the penalties for non-compliance stiff, Knuckey is confident that just a little bit of guidance will put many of these companies on a secure footing.

“The opportunities for laundering ‘dirty’ money are endless. And in this borderless electronic age there are no natural frontiers. So our ability to understand money laundering is limited only by our capacity to think laterally. But once you start thinking like a launderer and implement the right controls, everything pretty much falls into place.”, Cliff Knuckey, RISC Global..

RISC Global will offer two programmes: a 12-month Core Service that will train firms in compliance with the new regulations, and specialist services for those companies that already have a compliance program in place. The services include regular updates on legislation, and 24-hour support from the company’s team of advisors.

Those companies with anti-money laundering systems in place can consult with Knuckey and his team for specialist service, or help with due diligence and investigations.

“After so many years investigating money-related criminal activities, there isn’t much I haven’t seen. So it’s less difficult for me to spot the red flags that are indicative of criminals laundering money”, Knuckey said. “However, what never ceases to surprise me is how few controls and training schemes businesses have in place to combat ever-increasing levels of money laundering. In many instances, it’s an accident waiting to happen”.

As the focus on money laundering increases in importance in the law enforcement community, security professionals could save themselves and companies they represent any undue attention from regulators by making companies aware of their obligations and using their skills to identify and report suspicious activity.

The complete article first appeared in Security Voice magazine, February 2004.

Links:
www.riscglobal.com, RISC Global
Vic Stephens, C.P.C. Investigative Consultancy