Serious and organised crime centres around acquiring money, profit, influence and power through criminal activity, and whilst it is misunderstood and seemingly invisible to most people, its effects are far-reaching, bringing with it a wide range of social and economic issues.
Serious and organised crime groups (SOCGs) make money through illegal activity ranging from drugs and firearms to human trafficking and counterfeiting, and will often use violence, corruption and intimidation to protect their criminal activities. A recent analysis of the scale and impact of serious organised crime throughout Scotland identified 143 SOCGs operating in the Strathclyde area. These groups are increasingly turning to financial crime in order to defraud organisations, and seek out professionals such as lawyers and accountants for assistance.
Fraudsters and money launderers have developed a number of ways of targeting professional bodies. These criminals could be working alone or as part of a larger network, and operate from outside or within an organisation.
Recent enquiries have revealed that many cases depend on the complicity of collusive employees. Known as “insiders”, these employees are unlikely to be working independently and more often than not are part of a larger, organised group obtaining personal details from various sources. If compromised within one business, they will often be repositioned into similar employment with access to the same material and the same potential to inflict financial loss.
As well as placing people within your organisation, be aware that criminals do also try to recruit existing employees. They typically target specific workers and make their initial approaches in a social setting, such as in a pub or outside the workplace.
Often, employees inadvertently give away a few pieces of seemingly harmless information in conversation. They fear they have committed a crime by giving away information, and this, coupled with threats of violence if employees do not agree to provide further information, can make them a target.
Be aware that criminals use social networking websites to identify likely targets. Highlight this to your staff.
Organised crime involvement
Solicitors and accountants should be aware of multiple transactions from a single source, such as a new property development where there are significant commonalities in each application. This may be an indication that an organised criminal group (OCG) is targeting the business.
The source of any deposit should also be scrutinised and efforts made to confirm its validity. Be wary of customers who wish to conduct their business over the internet or by phone, thereby avoiding a face-to-face meeting.
If an intermediary is being used, then satisfy yourself that the intermediary has a proven history of sound and legitimate trading. OCGs have been known to favour the use of a complicit intermediary who will process false and fraudulent applications.
The use of complicit solicitors and accountants has been identified as a major tool to those involved in organised crime. These corrupt professionals bring shame and negative publicity on their profession and are pivotal to the success of an OCG. For instance, a corrupt solicitor can bypass the normal customer validation checks in relation to mortgage fraud and certify as correct a fraudulent or even fictitious application, thereby generating significant income for the OCG.
In addition, when working with a complicit accountant, the money can be laundered, thereby legitimising their criminal gains.
The collusion of estate agents and valuers can also artificially increase the value of property, maximising the extent of the fraud.
Businesses should also be aware that they are required under the Proceeds of Crime Act 2002 to report any suspicions of money laundering or suspicious financial activity via their designated money laundering reporting officer (MLRO). The resultant suspicious activity report (SAR) submitted by the MLRO will be investigated by the relevant law enforcement agency.
If there is any doubt on the part of an organisation as to whether they have been targeted by an OCG, our advice is that they contact their own regulatory body such as the Law Society of Scotland and report the matter. This will allow a proper assessment to be made of the circumstances by persons with relevant experience in that business area.
If, however, it is clear that criminality has taken place, the police must be informed. All police forces now have information on their websites as to how organisations can report instances of crime.
The penalties are severe. Those involved in an OCG run the risk of being convicted of criminality such as fraud and associated crimes such as money laundering; and having their assets frozen and losing any savings or property believed to have been obtained illegally. This can include personal savings, houses and cars.
In addition, members of professional bodies face criminal prosecution and the shame of having their reputations ruined; expulsion from the body, thereby finding employment very difficult in that same field; together with all the personal and family hardship that being found guilty of involvement in criminality may bring.
A new bill, Criminal Justice & Licensing (Scotland), is currently going through Parliament and if passed will create new offences such as directing, involvement in and failing to report serious organised crime.
Penalties such as a prison sentence of up to 14 years and new powers for prosecutors to apply for financial reporting orders make it all the more important for businesses and employees to ensure that correct measures are in place to truly know clients and avoid inadvertently assisting criminals.
Don’t become a target for OCGs: Advice for professionals
Advice for professionals
Look out for customers only wanting to do business over the phone or internet. All customer validation checks should be carried out, not just an identity check. Do a background check.
Scrutinise sources of deposits to confirm validity, with the use of receipts/bank statements.
Be wary of very similar multiple transactions.
If an intermediary is being used, always confirm their reputation and legitimacy.
Look out for possible organised crime indicators – cash rich companies and payments from invisible services.
Keep up to date with current legislation re money laundering and the protocol to deal with it.
If you are in doubt over the credibility of a client, their business, provenance of funds or legitimacy of a transaction, then submit a SAR and allow the law enforcement agency to assess the information and make an informed decision.
If it is clear that criminality has occurred – you must inform the police.
Failure to report suspicious activity will result in severe penalties:
Conviction of criminality in fraud, or money laundering.
Assets frozen, loss of savings, property, cars etc believed to have been obtained illegally.
Ruined reputation and expulsion from professional body, making finding employment in future difficult.
If the Criminal Justice & Licensing (Scotland) Bill successfully goes through Parliament, then penalties include prosecution and a prison sentence of up to 14 years.1
Don’t become a target for OCGs:
Advice for business/employers
Businesses/employers can take some simple steps to assist with preventing fraud which is often committed with colluding staff:
Know your staff – check CVs and take up references. The more sensitive the holder’s position, the more detailed the search should be.
When staff move, remember to change computers, passwords and building access levels.
Have strong control over access to computers, documents and equipment to prevent unauthorised use.
Train staff in security systems, disciplinary policies and procedures and encourage line management to enforce this.
Encourage whistleblowing philosophy in organisation.
Carry out random spot checks.
Take a hard line on culprits. Have a clear message that any colluding staff will be reported to any professional body and the police.
Limit use of USB drives and external storage items.
Consider ban on mobiles at workstations (have been used for photographing computer screens).
Divide duties between staff so irregularities will be spotted, and introduce monitoring controls.
Encourage staff to examine every transaction carefully – look out for inconsistencies and use expertise and professional judgment.
Develop clear procedures if suspicious activity is identified.
Empower managers to act quickly and take immediate action in respect of crimes in action.
Should you have concerns or suspicion that an employee or colleague is involved in or directing serious organised crime, you should report it to Crimestoppers on 0800 555 111 or to your local police office.o
In this issue
- Internet use in the workplace: a digital dilemma?
- Mental Welfare Commission for Scotland under threat
- Tricky choice over Liechtenstein assets
- Cost and benefit
- Curators: the vital link
- Solicitor advocates: the future (part 2)
- Trainee recruitment: dialogue continues
- What sort of life?
- Registers page
- Foot on the ladder
- Recovery vehicle
- Your say
- Lawyers in their sights
- West Bank: a response
- Fairness guide to success
- Facebook debate pulls them in
- Law reform update
- Ahead of the game
- Ask Ash
- A club you don't want to join
- Stress busters
- Into the ether we go!
- Breaking up is hard to do
- Definitive view
- Right that doesn't pale
- Mutu point
- Once bitten, twice shy
- Scottish Solicitors' Discipline Tribunal
- Website review
- Book reviews
- FSA starts to fight back
- For a good clause