What Is Money Laundering and How Is It Prosecuted?

Money laundering is defined as “the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises”. (CPS)

Money laundering is used as a means to outsmart the authorities, whether that be HMRC, banks, or police etc. Announcing funds that have appeared without providing their source isn’t exactly normal, and can imply criminality, however by ‘cleaning’ this ‘dirty money’ it can allow the people involved to fool the authorities into believing they obtained the money through legal means such as their business operations. 

What is the process money laundering goes through?

Money laundering can typically be broken down into three phases.

The first phase is placement. This is where the illegally obtained money is introduced to financial systems. Depositing the cash to a bank account, gambling, or buying assets are examples of placement commonly used.

This is followed by the next phase, known as layering. Layering is done to obscure the source of the funds by making a multiple transactions in a variety of ways. This includes but isn’t limited to transferring money between various accounts on a global basis, which would convert the currency. The goal of this phase is to obscure the ‘paper trail’ making it harder for authorities to determine the original source of the funds. 

The last phase is known as integration. Integration, as the name suggests is using the laundered money to spend however wanted within the legitimate economy. What the money is spent on depends on the individual in question, it could be business investments, material items, and more. By this time, if done successfully, the money should look like it’s been obtained legitimately. 

How Is money laundering prosecuted?

Money Laundering is prosecuted via law enforcement agencies such as the NCA, SFO, HMRC and local police forces. Albeit at different levels. Though they can work in conjunction on specific cases depending on how far it expands. 

These agencies work in accordance with regulations that include the ‘Money Laundering Terrorist Financing and Transfer of Funds Regulations 2017’ as well as the ‘Proceeds of Crime Act 2002’

Before prosecution, suspicion of an offence has to be determined by the authorities these offences can include:

*(The funds used in money laundering are referred to as ‘criminal property’).

• The acquisition, usage, or possession of criminal property.
• Becoming involved or willingly entering an arrangement which facilitates the use, control, retention and acquisition of criminal property.
• Concealing/disguising criminal property (Usually via money laundering)
• Tipping off someone under investigation of money laundering. Disclosing information about a money laundering investigation.

Now this has been established, how can the authorities prove money laundering?

It can be a complex process, but a common method is by following the ‘paper trail.’ this means tracing the financial transactions to their origin, which if done correctly, and suspicions are valid, will establish the link between said monies and underlying criminal activity. 

Even if this is proven, prosecution has to display that the defendant knew the money they used was a proceed of crime, beyond a reasonable doubt. 

In order to establish the paper trail, international communication and cooperation may be required. Coordinating an investigation in this way allows for the maximum evidence to be obtained.

In some cases, as mentioned previously, certain sectors can report suspicious financial activity, depending on the information the sector (such as a bank) has, a case can be developed.

Penalties for money laundering 

As its own offence, money laundering can result into up to 14 years of imprisonment, confiscation of any property/asset deemed to be obtained from criminal activity, and unlimited fines.