How to spot and report Money Laundering Fraud

Money laundering fraud is a criminal offence, yet it’s not always an obvious crime to spot. If you are found guilty of breaching money laundering laws, you face serious consequences. Here, we explain how to spot money laundering activites and how to report money laundering safely.

Vigilance is key when it comes to detecting the signs of money laundering fraud. Here are seven key signs that indicate an individual may be involved in money laundering:

  1. Unusual transactions or financial activity which seem out of character compared to normal behaviour.
  2. Large cash deposits or bank balances with little or no solid justification of where the funds came from.
  3. Cashier’s checks or money orders purchased with large sums of cash.
  4. Evasiveness or defensiveness around financial information or details when asked for them.
  5. Discrepancies in information such as multiple or unverified identification documents.
  6. Complicated financial transactions to confuse or throw investigators off the scent by hiding the source of the funds.
  7. Large sums of investment by third-parties, with no explanation for the private funding.

If you are the owner of a business which often deals with high value transactions, such as an art dealership, it’s important to register with HMRC to avoid a potential money laundering investigation.

What are Modern Methods of Money Laundering?

As well as being aware of how to spot traditional money laundering behaviour, it’s also important to acknowledge modern money laundering fraud methods. For example, one method on the rise involves individuals being approached through social media to become money mules. According to Action Fraud and HM Treasury, over 42,000 money mule social media accounts were reportedly involved in money laundering in 2019.

Money laundering fraudsters often target teenagers, young adults or vulnerable individuals who, knowingly or unknowingly, wind up participating in this criminal activity. For example, a job could be advertised on social media as a ‘money transfer agent’ which promises bonuses such as easy money, working from home and working in your own time. Realistically, this job entails individuals acting as a mule, whereby ‘dirty’ money is transferred into their bank account and then is sent on to offshore accounts. In turn, this makes the money mule a component in an organised crime ring which comes with serious repercussions. In other circumstances, money mules put themselves into dangerous situations by agreeing to withdraw the cash from their account and meet up with the fraudsters in person to hand over the laundered funds in return for a small payment.

Why is Spotting Money Laundering Fraud Important?

Money laundering costs the UK over £100 billion per year, according to the National Crime Agency (NCA). Money laundering fraud behaviour is typically connected to money acquired through criminal and possibly even terrorist activity. When you are aware of the three key money laundering stages, it can be easier to recognise money laundering as it is happening.

How to Report Money Laundering

More than 500,000 reports of suspected money laundering are submitted annually to authorities in the UK. If you do suspect a company or individual to be involved in any stage of the money laundering process, you should report them to HM Revenues & Customs (HMRC) immediately through the confidential online form. You can also report any money laundering activity to the National Fraud Intelligence Bureau via Action Fraud, who will then supply you with an official police crime number.

Money Laundering Reporting For Businesses

Under the Proceeds of Crime Act 2002, businesses within regulated sectors are required to report any suspicious financial activity to the authorities, whether they suspect staff or customers.

If you believe you have spotted any of the signs of money laundering within your company, there are certain steps to follow to report the suspicious activity. For businesses regulated by the Money Laundering Regulations, such as solicitors, estate agents, accountants, financial businesses and art dealers, you must appoint someone in the business to be a money laundering reporting officer (MLRO). It is the role of the MLRO to educate and inform staff of money laundering regulations. If you are a regulated sole trader with no employees, you must act as the MLRO yourself.

If you are an employee and suspect money laundering fraud within the company you work for, but they don’t have a nominated officer, seek legal advice as you could be liable for not reporting the suspected money laundering.

Report Money Laundering with a Suspicious Activity Report

If you are employed by a business who is monitored under the money laundering regulations of the Proceeds Crime Act 2002 and the Terrorism Act 2000, you must submit a suspicious activity report (SAR) to the NCA. SAR reports help to identify terrorist financing and other organised crime associated with money laundering. When your MLRO officer suspects an individual or business of suspicious financial activity, they should report potential money laundering through the confidential SARs online form in as much detail as possible.

The NCA 2020 annual report states that, between 2019 and 2020, the NCA received over 570,000 SAR reports. The NCA falls within the UK’s Financial Intelligence Unit (UKFIU), whereby the aim is to detect, investigate, convict and stop organised criminals. A SAR report can lead to the rightful conviction of money laundering fraudsters who at times can be linked to further serious organised crimes, such as human trafficking and exploitation.

How to Report Money Laundering Safely

For your own safety, do not let any individual or business know that you are reporting them on suspicions of money laundering fraud.

We hope you now understand the importance of spotting and reporting money laundering. Whether you or your company have intentionally or unintentionally been implicated in money laundering activity, it is important to seek legal advice from an experienced fraud lawyer as soon as possible to avoid facing money laundering penalties. Please don’t hesitate to contact our fraud barristers who are recognised experts in financial fraud cases.

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