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Money laundering part 2

Last week we looked at the first step in the traditional money laundering process, namely placement, converting the criminal property into non-cash assets. The second step is layering. Not only does a criminal want to disguise the criminal property so as to help avoid there being evidence available to link them all the proceeds to the original crime, and not only do they want to avoid any possibility of being implicated in money laundering offences (and obviously the more heavily things are disguised the more difficult it would be to obtain a conviction) but they also want to try and destroy any link with the original crime so as to avoid confiscation and recovery of proceeds of crime by way of civil action, pursuant to the present provisions of the Proceeds of Crime Act 2002. It is important to bear in mind that proceeds of crime can be recovered pursuant to the statute by way of civil action if it is proved on a balance of probabilities that the sums are the proceeds of crime (namely the civil standard, not the usual criminal standard of proof namely beyond reasonable doubt). All that means is to demonstrate that it is more likely than not that the amounts are the proceeds of crime.

One can therefore well see a strong incentive that criminals have to try and avoid any possibility of the property being held to be the proceeds of crime. If you are trying to track money back to a crime, then every time that property is changed or subject to a transaction which takes it further away from the original crime, the difficulty increases. Therefore one important aspect of layering from the point of view the criminal is to ensure that the proceeds go through a series of transactions which makes it difficult to show the link with the original criminal proceeds.

These transactions can take a number of forms. Property (whether here or elsewhere) can be bought and sold. Contractual obligations can be entered into which lead to money moving around and being returned. Often the tell-tale signs to watch out for our transactions which do not seem to be genuine. The money launder will rarely want to wait for ordinary transactions to lead to a situation where there is sufficient to clear blue water between the crime and the proceeds. Therefore they will want to speed things up by undertaking false transaction is at all possible.

One way in which they can try and do this is to put money through a solicitors firm. You might think this was difficult but criminals can be relatively sophisticated and cunning about the steps they will take in order to try and bring this about. For example, they can set up what seems to be a genuine transaction. They may well instruct their solicitors that this is a transaction which has some degree of urgency. They might be buying shares in a company, or property, or whatever. Their stated fear is that another purchaser will get their ahead of them. They ask a firm of solicitors to handle the transaction. They then explain that they want the solicitors to be ready to complete the transaction on their behalf, and with that in mind they are providing the the money to complete. The money therefore goes into client account. Of course, there was never any intention that the transaction should be proceeded with. The other party may well be a criminal associate, or someone who was just paid off to appear to enter into the transaction. The other side then write saying that the sale will no longer go ahead. (In another version, the other side may be legitimate, but the criminal will find an excuse to avoid going ahead with the transaction). In consequence there is a large amount of money sitting in client account with the solicitors firm which needs to be repaid. When it is repaid that money will doubtless be paid into a bank, and since it is money coming from a solicitors firm it will be regarded as beyond suspicion. This can then be used to enter into a sequence of transactions thereafter. The whole point is, that getting money through a solicitors client account helps facilitate the subsequent sequence of transactions. These transactions may also involve deals with foreign companies. Essentially the aim is to make it impossible to follow the trail.

If of course a solicitor assists in money laundering then there are potential consequences, but those will be dealt with when we consider the specific statutory offences which can arise from money-laundering in respect of parties other than the criminal originally trying to launder the money.

Next week will turn to the third stage in the money laundering process.

Michael J. Booth QC