Fraud is serious business in the UK. According to the National Crime Agency, fraud is the most commonlyexperienced crime in the UK, as various fraudulent acts target consumers and businesses alike. Money laundering is a form of fraud less commonly experienced in the UK, but one which can have a devastating effect on businesses even tangentially related.
You may be concerned that business partners or clients are taking part in a money laundering scheme; alternatively, you may be retaining the services of a white-collar defence law firm in relation to allegations against yourself and your company. Whatever the case, it is crucial that you understand the definition and mechanisms of fraudulent schemes such as money laundering, in order to limit your exposure to such acts – or mount a meaningful defence yourself.
What is Money Laundering?
Money laundering is a form of financial fraud, whereby money is ‘laundered’ through a third party or shell company in order to distance it from its origins. Where money has been made illegally, whether through fraudulent transactions or theft, money launderers seek to make said money ‘clean’, by separating it completely from the illegal acts that created it.
How Does Money Laundering Work?
There are various ways in which money laundering can be carried out, but the process remains largely the same for each iteration. There are three principal steps to laundering money: placement, layering and integration.
In the first step, the ‘dirty’ money is removed from its initial source – whether transferred into a foreign currency or placed in an international bank account. The second step obfuscates the source of the money, by splitting it up into a series of unrelated transactions. Here, fraudulent businesses may be set up to receive ‘payment’ for services rendered, the invoice for which is proof of transaction. Alternatively, existing companies or institutions may be brought in on the scheme.
The final step brings the funds back together, having been ‘washed’ and legitimised by a complex web of ‘legitimate’ transactions. At this point, the money is more or less completely removed from its origin, and can be spent on assets or resources without raising the same suspicions that a large sum of undeclared money would.
How to Fight Money Laundering
Money laundering is a complex crime with many moving parts, and as such can be difficult for crime agencies to fully uncover. However, with contextual information and collaboration between international agencies, it is possible to uncover the trail of laundered money and bring those responsible to account.
Developments in technology, specifically artificial intelligence, hold promising results for fraud agencies. The ability to comb through masses of data and uncover discrepancies will enable firms to track money launderers without the man-hours usually associated.
