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Anti-money laundering expert convicted for failure to report money laundering
The former chairman of the Association of UK Payment Institutions, which represents payment institutions regulated by the Financial Conduct Authority, has been convicted in relation to an £850,000 investment fraud.
Dominic Thorncroft was found guilty of failing to alert the authorities to money laundering, retaining wrongful credit (a theft offence) and breaching money laundering regulations.
Thorncroft was a self-described money laundering expert whose job was to protect individuals and businesses from economic crime. He also allowed his business accounts to be used by fraudsters to transfer money to Hong Kong and China.
Stephane Pendered of the Crown Prosecution Service said, “Thorncroft promoted himself as an anti-money laundering expert but failed to live up to the standards he set for others, so when his business was clearly being used to launder criminal property, he failed to follow his own advice and report what was happening to the authorities.”
Crucially, Thorncroft did not commit fraud himself. However, it can be a criminal offence to allow money laundering and to fail to report suspicions or knowledge of money laundering to the authorities.
Your business may also be subject to money laundering regulations, and if so, staying on the right side of the law should be a major concern for you.
Here, we outline when someone may be penalised for failing to comply with requirements to detect, report and prevent money laundering.
What is Money laundering?
Money laundering is defined under the Proceeds of Crime Act 2002 (PoCA) as a range of offences “concerning the possession, concealment, conversion, transfer or making of arrangements relating to the proceeds of crime. This is not limited to money or cash”.
It is the “process by which the proceeds of crime are converted into assets which appear to have a legitimate origin”.
There are two types of money laundering offences:
- Those who commit money laundering offences and launder the proceeds of crime.
- Those who only launder the proceeds of crime committed by others.
We are concerned with the second type of money laundering offences.
The laws behind anti-money laundering
Anti-money laundering in the UK is comprised of various laws and regulations, including:
- The Proceeds of Crime Act 2002 (PoCA) – the primary law covering money laundering.
- The Terrorism Act 2000 (TACT) – which focuses on terrorism financing.
- The Money Laundering Regulations – place anti-money laundering obligations on certain higher-risk private sector industries.
- Sanctions and Anti-Money Laundering Act 2018 (SAMLA) – intended to smooth the Brexit transition in relation to international anti-money laundering standards.
What types of business have anti-money laundering duties?
Businesses in certain sectors – including accountants, estate agents and financial service businesses – are required to comply with the money laundering regulations and must be monitored by the relevant supervisory authority.
Some businesses are regulated by an industry specific body, such as the Financial Conduct Authority (FCA).
If a business is not already supervised but it falls into one of seven categories, it must register with HMRC to be able to carry out the typical kinds of activities associated with their type of business. These seven business types are:
- Money service businesses not supervised by the FCA
- High value dealers
- Trust or company service providers not supervised by the FCA or professional body
- Estate agents
- Bill payment services not supervised by the FCA
- Telecommunications, digital and IT payment service providers not supervised by the FCA
- Art market participants
- Letting agencies
If a business trades without registering, it is a criminal offence.
Under the Money Laundering Regulations, supervisory bodies can investigate and impose penalties for breaches.
Where a breach of regulations is serious, the body will usually refer the case to criminal enforcement authorities such as the Crown Prosecution Service (CPS).
Failure to comply with the Regulations may lead to criminal offences under PoCA and TACT.
What are businesses’ anti-money laundering obligations?
Businesses affected by Money Laundering Regulations have responsibilities in their day-to-day course of business to carry out ‘customer due diligence’. This essentially means that customers are who they say they are and that their transactions are legitimate.
Such obligations include appointing a ‘nominated officer’, providing sufficient training to employees and record keeping.
Money laundering criminal offences
Regulation 45 of the Money Laundering Regulations
Regulation 45 creates the offence for failing to comply with money laundering regulations. It is an ‘either-way offence’, which means it can be tried in either the Magistrates’ Court or Crown Court. Conviction can result in a maximum prison sentence on indictment (conviction in the Crown Court) of up to two years and a fine.
It is a defence if the accused took all reasonable steps and exercised sufficient due diligence.
Regulation 47 provides that a corporate body (such as a limited company) can also commit an offence under Regulation 45 with the consent, connivance or neglect of one of its officers, in which case both the individual and corporate body can be prosecuted.
Failure to disclose – Section 330 Proceeds of Crime Act 2002
Under section 330 of PoCA, it is a criminal offence for a business in a regulated sector to fail to disclose knowledge or suspicions of money laundering to a ‘nominated officer’.
The offence is committed where a person:
- Receives information in the course of business.
- Knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
- Can identify that person or where the laundered money is (or can assist in identification or finding the whereabouts).
- Fails to disclose to a ‘nominated officer’.
Failure to disclose is an ‘either-way’ offence with a maximum penalty on indictment (conviction in the Crown Court) of up to five years imprisonment and a fine.
Get specialist advice about money laundering investigations and prosecutions in Bournemouth
If you are being faced with investigation or prosecution for a money laundering offence, you need advice from a lawyer who specialises in this area.
We are a dedicated criminal defence firm in Bournemouth, Dorset and one of the leading teams of criminal lawyers in the region. Our team have a wealth of experience defending clients facing criminal and regulatory proceedings under the Proceeds of Crime Act 2002, the Money Laundering Regulations and any other money laundering offence, regulatory offence, serious fraud offence or white collar crime.