Legal Perspective: A look at anti-money laundering law in UK

As a rule each person who is employed by a financial institution or is otherwise carrying out a financial activity covered by the money laundering regulations should follow the internal reporting requirements.

This is in accordance with the procedures laid down by the employer who should prepare them in a way to satisfy the requirements.

Reports by staff of financial sector businesses should be made through the money laundering reporting officer, or a nominated deputy, who has the responsibility to assess the validity of the grounds for suspicion and to judge, on the basis of factual information available, whether a report should or should not be made to the National Criminal Intelligence Service.

The UK legislation clearly protects those persons and institutions reporting suspicions of money laundering transactions from claims in respect of any alleged breach of client confidentiality.

The regulation also requires institutions and businesses concerned to establish and maintain specific policies and procedures to guard their businesses and the financial system being used for the purposes of money laundering.

In essence, these procedures are designed to achieve two purposes: firstly, to enable suspicious transactions to be recognised as such and reported to the authorities; and, secondly, to ensure that if a customer comes under investigation in the future, a financial institution can provide its report of the audit trail.

The Money Laundering Regulations cover:

- Internal controls and communication of policies.
- Identification procedures
- Record keeping
- Recognition of suspicious transactions and reporting procedures.
- Education and training of relevant employees.

Failure to comply with any of the above requirements constitutes an offence punishable by a maximum of two years; imprisonment, or a, fine, or both. This is irrespective of whether money laundering has taken place or not.

Responsibilities of the supervisory authorities:

All supervisory authorities (including financial services regulators) have specific obligations under the money laundering regulations to report to National Criminal Intelligence Service (NCIS), any information they obtain which in their opinion is, or may be, indicative of money laundering.

Supervisory authorities also have an interest in measures employed by regulated entities to counter money laundering because of the damage which financial institutions and and their customers can suffer from it.

Occurrences of money laundering, or the failure to have adequate policies and procedures to guard against being used for money laundering may call into question the adequacy of systems and controls, or prudence and integrity or fitness and properness of the management of regulated entities.

Compliance with these guidance notes, or equivalent guidance issued by a recognised professional body or statutory regulator, is likely to be an important point of reference in any assessment of the adequacy of systems and controls to guard against money laundering.

The supervisory authorities (including financial service regulators) are notifying all who they have authorised, and regulate or supervise, of the issuing of these revised guidance notes.

They are taking the opportunity of emphasising the relevance of a breach of the regulations to the question of prudence and integrity of fitness and properness and the potential seriousness with which they would view any such breach.

They have also indicated they will continue to liaise with NCIS in order to be alert to issues of mutual concern.

Offences in the English law:

The English legislation deals with this issue in different laws, for example:

1. In case of drug trafficking and terrorist activity, it is an offence for any person who acquires knowledge or a suspicion of money laundering in the course of their trade, profession or business or employment, not to report the knowledge or the suspicion as soon as it is reasonably practical after the information came to his attention.

A maximum of 5 years imprisonment or a fine or both. (Section 52 of the Drug Trafficking Act 1994 and section 18 A of prevention of Terrorism Act 1989).

2. Informing a person, who is the subject of a suspicious transaction report or anybody else, that a disclosure has been made or that the police or customs authorities are carrying out an investigations.

A maximum of 5 years imprisonment or one or both. (Section 53 of the Drug Trafficking Act 1994, section 93 D of the Criminal Justice Act 1988 and section 17 of Prevention of Terrorism Act 1989).

3. Providing assistance to a criminal to obtain, conceal, retain or invest funds, if the person knows or suspect that funds are proceeds of criminal conduct.

A maximum of 14 years imprisonment or a fine or both. (Sections 49, 50, & 51 of the Drug trafficking Act 1994, sections 93, A, B & C of the Criminal Justice Act 1988) and section 11 of Prevention of Terrorism Act 1989).

The author is a legal consultant on banking and stock market laws.