Graham Barrow, money laundering consultant and writer about financial crime, discusses the UK Government’s recent announcement regarding the professions and money launderers.
The British government says it is targeting accountants, lawyers and real estate agents who help hide dirty money as part of an increasingly aggressive effort to crack down on illicit fund flows from Russia, China and elsewhere.
Is that fair?
Surely the overwhelming majority of solicitors et al are completely honest? Well, yes but that’s equally true of the bankers who, for the most part, have been the focus of the action thus far.
But pretty much every money laundering scheme comprises the formation and use of legal entities, making account filings and utilising property purchases as a safe home for newly laundered money.
And all of these activities require the use of the professionals whose services are necessary to ensure success. And it’s not necessarily the ‘bent’ ones on the fringes of the profession who are being used.
Because if, say, some corrupt politician has gone to a great deal of trouble to acquire a considerable quantity of illicit capital, the incentive to retain it is very high. This means that the launderers will go to great lengths to ‘legitimise’ the funds and that, in turn, means avoiding, wherever possible, known ‘suspect’ professionals.
Consequently the honest, respectable professionals are likely to be targeted by the launderers because they, in an important way, can be key to the money laundering process but, by their very honesty, also play an important role in cleaning the money.
What does this all mean in practice?
Due diligence is not just a process. It’s vital that properly knowing your client, the source of their overall wealth, the source of their immediate funds and their reputational standing is equally as important as ensuring they have suitably verified identification. Especially as the laundering process might already have distanced the money from the original corrupt politician, for example, by two, three or more degrees of separation. It’s rare to see the perpetrator’s name on the documentation but that doesn’t mean that there aren’t links back to them.
It means not taking information at face value. I remember one investigation where the client provided an immaculate set of documentation – including driving licence and bank statement – except that the address given was in London EC4 which I knew was not a residential area. The address was a virtual office and the documents were high class fakes.
Attention to detail and ensuring a qualitative and not just a quantitative approach to due diligence are the keys to ensuring you don’t get used.
So if the government does start focusing as much on solicitors, accountants and estate agents, notwithstanding what they may find with others, at least you will be able to face such scrutiny with equanimity.
Graham will take part in a panel discussion on risk awareness and money laundering regulations at Leading Legal Excellence, our 2018 annual conference.