Money Laundering
Well done! You are going into business for the first time. You are taking on a fish and chip shop - The Codfather. You are acquiring the stock, the goodwill and the lease. You have made an appointment to see your new solicitor to act for you.
Then a friend asks whether you have thought about the implications of the Proceeds of Crime Act 2002 (POCA), the Money Laundering Regulations 2003 and the Serious Organized Crime Authority (SOCA). You think your friend is nuts. He is not.
This becomes apparent when you go to see your friendly new solicitors - or accountants or financial advisors and they won't take your word that you are who you say you are. They will demand official photographic proof of your identity, such as a passport or photo ID driving licence, as well as proof that you live where you say you live, such as a recent utility bill addressed to the property you have given. Not a happy start to what you might have thought was going to be a simple relationship of trust.
It gets worse. Your solicitors or advisors will begin asking you some intrusive and, perhaps in your view, impertinent questions. They will quiz you about the source of the money which you are using to pay for The Codfather business and indeed might have to go so far as to ask you to provide proof – so if you thought it might be convenient for you to pay part of the purchase price or indeed your solicitors' charges in cash, forget it.
You tell your solicitors that part of the purchase price is being provided by an investment from your 80-year old Great Aunt Elsie. Further impertinent questions will follow about the source of that money as well. What on earth is all this about?
Money laundering is basically the process by which criminals “launder” their ill-gotten gains by cleverly concealing its criminal origin and turning it into apparently legitimate assets. Internationally it is now a multi-billion pound industry – and it is a very serious problem. A number of European Directives have been issued requiring Member States of the European Community to enact legislation to combat it. POCA is the UK's response. Essentially the Act creates three “money laundering” offences. First is the acquisition, use or possession of criminal property (Section 329); second is the concealing, disguising, conversion, transfer or removal of criminal property (Section 327); third, it creates an offence for a person to be concerned in an arrangement which he knows or suspects facilitates the acquisition of criminal property (Section 329). Criminal property is defined very widely. It is essentially any money or property, however trivial, derived from criminal conduct. That is all very well, but what has it got to do with you and your fish and chip shop?
The Act recognizes that criminals wanting to legitimize their criminal property will almost inevitably need to involve legitimate professionals such as solicitors, accountants or financial advisors. It therefore makes such professionals “gatekeepers” under the Act. If in the course of acting for a particular client it comes to the knowledge - or even in some cases merely the suspicion - of the professional that criminal property is involved, the Act imposes on the professional a duty to report it to SOCA. Having reported it, the professional cannot tell his client that he has done so because there is a separate offence of “tipping off”.
These duties on your solicitor or other professional are very onerous. They can override your solicitor's duty to you of confidentiality and even in some cases the time-honoured principle of legal professional privilege. A failure to disclose or to “tip off” a disclosure are criminal offences - and solicitors have already been sent to prison for offences under the Act.
What's more, under the Money Laundering Regulations 2003, solicitors are obliged to set up systems to ensure proper client identification, record keeping, reporting and training. A failure to do so is again a criminal offence. So you can perhaps understand why solicitors and other professionals have become very conscious and conscientious of their obligations under the Act and the Regulations.
So, if your Great Aunt Elsie ends up being prosecuted by HM Customs & Revenue, it could be because your solicitor discovered that her investment in your business was possible because she had built up a nest egg from a little dress making business which she never declared for tax purposes and, to be on the safe side, your solicitor has made a formal disclosure under the Act about your great aunt to the Serious Organized Crime Authority.
And when finally the police come knocking on your door, you only have yourself to blame. Did you really never pause to consider why your little fish and chip shop was called The Codfather?
Tim Dixon is one of the few specialist solicitors dealing in Child Care cases. A member of the Law Society's Children's Panel, he is based at Lemon & Co's Regent Circus offices.
This article provides an overview only. For specific advice and further information contact: Tim Dixon on 01793 527 141 alternatively by email at timothy.dixon@lemon-co.co.uk
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<p><strong><a href="http://www.lemon-co.co.uk/article_money-laundering.php">Money Laundering </a></strong><br />
The implications of the Proceeds of Crime Act 2002 (POCA), the Money Laundering Regulations 2003 and the Serious Organized Crime Authority (SOCA). ...</p>