White-Collar Crime, Money Laundering, and Risky Business

According to Edwin Sutherland, a renowned sociologist and a leading figure in the Criminology discipline, White Collar Crimes (WCC) are crimes committed by people of high social status and respectability in the course of their occupation. In the United Kingdom, the main offences that constitute WCC are fraud, fraudulent trading, conspiracy to defraud, false accounting, market abuse, cartel conduct, and money laundering. 

White-collar crimes can often be difficult for the larger portion of the population to understand. This is due to most WCC investigations and prosecutions presupposing a complex sequence of facts and evidence. Out of all the aforementioned offences, money laundering is considered to be one of the most interesting offences to discuss due to both its dynamic nature as well as the substantial portion of the global GDP that it affects. In the UK, although it is difficult to determine the percentage of GDP that money laundering affects, various sources estimate that the figure is anywhere between 0.29-15%. Moreover, according to the International Monetary Fund, there is approximately $800 billion to $2 trillion being laundered globally each year. To put this into perspective, this amount accounts for 2-5% of the global GDP. 

So, what is money laundering?

“Money Laundering is the process by which criminal proceeds are sanitised to disguise their illicit origins” 

According to the Crown Prosecution Service

To put into simpler and more commonly used terms, money laundering is when dirty money, which is dirty because it has been obtained using illegal means, is cleaned by disguising its source. The origins of laundered money is often traced back to a range of criminal activities such as fraud, bribery, drug and/or human trafficking. After the money has been cleaned/laundered it provides an avenue for criminal syndicates to fund further illicit activities and/or a method for alleged criminals to increase their individual wealth in a legitimate manner using their ill-gotten gains.

A further breakdown of the process of money laundering:

  • Placement: depositing the proceeds of crime into a bank account of an individual or a business in order to place the funds in the financial system of a country.
  • Layering: using various financial and bookkeeping methods to form an intricate trail of transactions that are difficult to follow. This is done to fully cover the source of the funds as they start moving around the financial system of a country.
  • Integration: investing the funds into various industries within the economy causing the illicit funds to get legitimised, in order to appear to be sourced from a legal source.

A number of government agencies have the power to investigate and prosecute individuals suspected of money laundering. The National Crime Agency (NCA), Her Majesty’s Revenue and Customs (HMRC), and the police are England and Wales’ main investigatory bodies for offences including and relating to money laundering. Secondly, The Crown Prosecution Service (CPS), an independent agency within the criminal justice system that is responsible for prosecuting criminals upon receiving evidence from the police and other government organisations, also prosecutes individuals and corporate entities that have incurred criminal liability for committing various money laundering offences.

However, the Serious Fraud Office (SFO) may investigate and prosecute in more significant and complex cases of fraud or bribery alongside the Financial Conduct Authority, which is the financial regulatory authority in the United Kingdom. It is notable that the SFO has only prosecuted 4 cases between 2014 and 2019 although the agency has received 153 reports of alleged money laundering activities. Furthermore, the SFO has released guidance this year on Deferred Prosecution Agreements (DPA), which are court-approved agreements between an SFO or CPS prosecutor and a company which provide an alternative route to prosecution for companies where it is in the public interest. When a DPA has been entered into, the company will have to meet the conditions set out by the prosecution within an agreed time limit. The terms set out by the prosecution in a DPA can vary from an admission of guilt and/or a payment of a fine alongside more specific conditions that the company must adhere to. It is worth noting that a DPA does not protect liable individuals, nor does it provide the company with immunity from future prosecution.

 A recent successful case that has been jointly investigated by the SFO and its counterparts in France and the United States since 2016 is the case involving Airbus SE, the company that was the defendant in a criminal prosecution involving multiple counts of failure to prevent bribery. This case is considered to be a major success for the agency due to the signed DPA resulting in a record of £833 million in fines to be paid by Airbus SE to the SFO. 

Prior to the DPA, Airbus SE was to be prosecuted on indictments contrary to section 7 of the Bribery Act 2010, which outlines how a commercial organisation commits a crime if it does not have adequate procedures in place to prevent persons associated with the company from:

  • Bribing another person to obtain/retain business for the company, 
  • Bribing another person to obtain/retain an advantage in the conduct of the business of the company. 

How does this information relate to money laundering?

The fine paid by Airbus SE to the SFO included the costs of the investigation, which totalled to £6.2 million. It has also been reported that a recent investigation into the conduct of Barclays has cost the SFO around £10 million, this investigation was regarding a conspiracy to commit fraud after Barclays executives aided in transferring £322 million to Qatar as a repayment for rescue financing following the 2008 financial crisis. In comparison, the investigation into the disappearance of RAF airman Corrie McKeague has cost Suffolk Police £2.1 million, this police investigation is considered to be one of the most expensive in the last 10 years. Hence, it is clear that white-collar crime investigations are extremely costly in comparison to standard criminal investigations in which human costs are at stake.

This can be the rationale behind the policy of responsibilisation that has been adopted by Parliament in relation to white-collar crime offences. Responsibilisation is a term that has emerged in governmentality literature to describe the process by which governments shift their responsibility of providing services, which are usually provided by government organisations and agencies (such as law enforcement and crime prevention), onto companies and individuals within their jurisdiction. This is considered to be a neo-liberal mechanism of governance in which industry deregulation is prevalent alongside the criminalisation of omissions committed by corporations and individuals. Moreover, the aforementioned government agencies are not responsible for the regulation of all industries in which money laundering is suspected, however, they are responsible for investigating and prosecuting corporations and individuals for their shortcomings in detecting money laundering activities in the industries they operate in. The statutory obligations to detect money laundering are set out in sections 330-332 of the Proceeds of Crime Act 2002

A person commits a failure to disclose an offence when they fail to provide information to the NCA via a suspicious activity report (SAR) regarding knowledge or suspicion (based on reasonable grounds) of money laundering activities. This information must either include knowledge of the identity of the launderer and the whereabouts of the criminal property or there must be a belief that the information would be helpful in identifying the identity of the launderer and the whereabouts of the criminal property. This offence can be committed by people and nominated officers in the regulated sector and other nominated officers working in the unregulated sector.

“Regulated sector” is the name given to the industries that are required to adhere to Anti-Money Laundering Regulations, such as;

  • Credit institutions
  • Financial institutions
  • Auditors, insolvency practitioners, external accountants and tax advisers
  • Independent legal professionals
  • Trust or company service providers
  • Real estate agents
  • High-value dealers
  • Casinos

Nominated officers are people who are nominated by their organisation/corporation to receive SARs, if the SARs are not disclosed to the NCA, the nominated officer is likely to be held criminally liable for a failure to disclose the relevant information/SAR.

The UK’s Anti-Money Laundering Regulations have last been updated by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which were transposed by Parliament in January 2020 to ensure compliance with the European Union’s 5th Anti-Money Laundering Directive (5AMLD). Notably, the 5AMLD requires EU member states to start regulating cryptocurrency assets and exchanges, which adds to the list of the regulated sectors.

 This was seen as a part of a major EU crackdown on money laundering, in fact, the 6th Anti-Money Laundering Directive (6AMLD) has already been announced; the EU aims to extend the concept of dual-criminality when the other offences committed are related to organised crime, corruption, and human/drug trafficking. This will allow EU Member States to collaborate and share evidence in a multi-jurisdictional nature during prosecutions. The 6AMLD also aims to add predicate and aiding/abetting offences which will provide a more rigid prosecutory framework for Member States when dealing with money laundering cases, including an equivalent to the offence of failing to prevent financial crime, which has been previously discussed in the UK but was never enacted. Moreover, It is worth mentioning that the UK already imposes heavy regulatory sanctions on those who fail to have adequate measures in place to prevent money laundering, but this still does not constitute a criminal charge that is similar to the one outlined for bribery (as mentioned above). 

The United Kingdom’s government has chosen to opt-out of the 6AMLD on the basis that there is a sufficient legal framework for dealing with money laundering activities and offences. This decision can be evaluated from several angles, but it does not alter the fact that white-collar crimes can be committed in more sectors than the ones initially considered by the UK’s government in its Anti-Money Laundering laws. Given that there are money laundering laws and regulations currently in place for regulated industries, as well as criminalisation of failing to report money laundering to a nominated officer in an unregulated sector, there is also an assumption that businesses in various unregulated sectors have nominated officers. Furthermore, although there are existing criminal offences for money laundering facilitators, financial regulatory authorities in the UK have made announcements of reform plans for data collection, this can be an indication of the shortcomings of the current system in place. In its annual report, the NCA has recorded a 20% increase in SARs from the previous year, making the amount of SARs submitted in 2020 (573,085) a record figure. Hence, accordingly with the current laws and regulations in place, as well as the increasing rate of SARs, the government in the UK risks an increase in novel cases of money laundering in various industries.

For example, following a report made by the Financial Intelligence Unit in Kuwait of an unanticipated enlargement of the bank accounts of multiple social media influencers, an announcement was made by Kuwait’s Public Prosecution office of an investigation of high profile social media influencers for alleged crimes of money laundering. The Attorney General in Kuwait ordered the seizure of their assets, a freeze on their bank accounts, as well as a travel ban to hinder any attempts of fleeing to other countries. Following the release of the suspects on bail, we now know that the nature of the investigations revolved around the alleged use of the bank accounts of social media influencers to launder money that has been obtained by means of unlicensed advertising and publicity on their personal social media accounts. Social media influencers are not authorised professionals in Kuwait, which ultimately means that they operate in an unregulated industry, due to these regulatory gaps, there are now calls for regulating the social media industry similarly to other sectors that are required to adhere to Kuwait’s Anti-Money Laundering Laws and Regulations. Although legislators in Kuwait have vigorously updated their legislation to hinder money laundering prior to its occurrence, it was generally not anticipated that social media influencers would earn millions of dollars through advertising. Furthermore, although the regulation of the social media industry has been discussed in the UK, the focus was on the content promoted rather than the income received from advertising.

Hence, whilst many would consider the UK’s legal framework sufficient for battling money laundering, it can also be considered unreasonable for any democratic government bound by time-consuming legislative stages to genuinely believe that it has an adequate legal framework in place to prevent the constantly mutating actus of white-collar crime. 

This Post Has 4 Comments

  1. Lina s Khaddour

    Interesting by reading this article …
    Good job …

  2. Samer

    The article adequately discussed the topic, and reviewed many issues related to the topic, to conclude the reader of the need to amend many laws to control this scourge that destroys morals and the economy.
    Well done Salah

  3. Mays Alhourani

    The subject of the article is explained clearly and supported by suitable examples

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