Money laundering is a type of fraud that involves multiple stages and can be associated with other forms of organised crime, such as drugs and human trafficking. In the UK, money laundering sentences are taken seriously, and businesses must be vigilant to avoid money laundering penalties.
Money laundering sentences are decided by either the Crown or Magistrates’ Court. Typically, higher value money laundering cases are sentenced at the Crown Court with a jury.
In the Magistrates’ Court, the maximum sentence for money laundering is a year’s imprisonment, alongside an unlimited fine. These fines are usually decided by which band the defendant is found guilty of. For example, the fine under B and F could be up to 700% of the guilty party’s weekly income.
However, each money laundering sentence and case is individual. Therefore, the judge will look at the defendant’s intentions in the money laundering scam and whether they have genuine remorse for their actions. For instance, in some circumstances, the accused may be a vulnerable individual who was coerced into their actions and didn’t understand the repercussions and harm caused.
Depending on the level of culpability found, the maximum sentence for money laundering the Crown Court can issue in the UK is 14 years imprisonment. On top of this sentence will be a fine.
In the UK, money laundering regulations state you may be able to reduce the money laundering penalty if you enter a guilty plea. Nevertheless, a reduction is not guaranteed and has conditions; for example, the defendant must be over 18 years old. It also depends on when the guilty plea was made for the judge to consider a reduced money laundering sentence.
Anti-money laundering breaches are treated with increasing severity as per the 2019 regulations. In fact, it is now a criminal offence to recklessly make a false or misleading legal statement in a money laundering investigation, and you can be subject to a money laundering sentence in the UK. The money laundering penalties for this type of offence can be a fine or up to two years in prison.
The Financial Conduct Authority (FCA) will prosecute businesses whose anti-money laundering controls aren’t watertight. This is why we recommend businesses consult an experienced money laundering barrister to advise and, if necessary, represent them.
Throughout 2021, three major banks – HSBC, NatWest and Monzo – came under investigation for anti-money laundering failings and not complying with regulations. While Monzo’s case is ongoing, HSBC and Natwest were fined £63.9m and £264.8m, respectively.
Anti-money laundering is taken seriously with regards to commercial banks, and they are responsible for monitoring and taking appropriate action where suspicious activity suggests money laundering may be taking place.
The NatWest case was the first of its kind, with the FCA pursuing criminal charges for money laundering failings. NatWest pleaded guilty in October 2021, which reduced their fine from £398m.
As HSBC did not dispute the charges and agreed to settle, they received a reduction on the original £91m.
As the UK is a global financial centre, it is viewed as an alluring location for launderers to invest the proceeds of their crimes. As a result, the UK and governments worldwide have increased their efforts in the battle against money laundering by implementing systems that will report suspicious activity.
The money laundering procedures force businesses to put in place policies to prevent potential money laundering fraud or other associated organised crimes. These regulations mean firms have to:
The UK’s money laundering regulations were last revised on the 15th September 2020, in preparation for the transition period for Britain leaving the European Union ending on the 31st December 2020. These changes in legislation are outlined in the SI 2019/253, formally known as The Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2019.
The 2017 money laundering procedures applied only to the following financial institutions:
The 2019 money laundering regulations extended this list to also apply to:
The changes in the 2019 money laundering procedures require businesses to become more risk-aware regarding due diligence with ‘high-risk third countries.’ If businesses fail to comply with these changes, they risk being subject to money laundering penalties. Let’s break down these regulations further.
As part of money laundering regulations, written risk assessments must be made available to the designated supervisor. These assessments must identify the risks posed to their business by money laundering and the risk factors. For example, areas of operation, customer base, services or products, and handling of transactions need to be included to help make money laundering risks clear and avoidable.
Once a risk assessment is finalised, policies, controls and practical procedures need to be approved by senior management. These procedures must be implemented within the business to mitigate and manage the risks identified in the assessment. Both the risk assessment and policies must also be communicated to relevant branches and subsidiaries, regardless of whether they are inside or outside the UK.
Customer Due Diligence (CDD) must be applied in certain circumstances for new and existing customers, as outlined in the 2019 money laundering legislation. Businesses must decide on the level of CDD they feel is appropriate to employ, using the risk assessment.
While ‘simplified CDD’ is no longer deemed automatically sufficient at any time, ‘enhanced CDD’ is compulsory in certain high-risk situations, as is enhanced ongoing monitoring.
According to the money laundering regulations, high-risk situations may include business relationships or transactions with a politically exposed person or a ‘high-risk third country‘.
To identify whether customers are politically exposed, businesses must have the correct systems in place, such as applying compulsory ‘enhanced CDD’ measures to individuals for at least 12 months after they cease to be a politically exposed person.
The 2019 money laundering legislation requires that relevant employees of a business are screened. The screening includes assessing the employee’s skills, knowledge, expertise, conduct, and integrity. Employees who require screening include individuals who work for the firm and:
Relevant employees must also be trained in accordance with the 2019 regulations. This includes:
In the case of Operation Vista, R v. Mohammed Aslam and Others, St Pauls Chambers barristers, Cameron Brown KC and Hal Watson both acted as junior Prosecution Counsel in a multi-million pound money laundering case. This case involved VAT fraud, whereby the £40 million of laundered money was ‘cleaned’ through the business Omnis FX Capital. In this case, the money laundering sentence was over 20 years for the six defendants.
In December 2020, the money laundering sentence for Thomas Maher was set as the maximum sentence of 14 years and 8 months following an investigation by the National Crime Agency (NCA). Maher, a Warrington-based haulage firm owner and member of an organised crime gang, smuggled laundered money and drugs across Europe.
There were signs that suggested money laundering was taking place. Maher was living a lavish lifestyle with expensive cars, jewellery, watches and holidays, yet paid himself below the minimum wage to avoid paying the correct amount of tax. He did this for over 20 years.
One of the most high-profile UK money laundering cases was that of ‘Mr Big’, Martin Evans. Evans, from Swansea, was part of a multi-million money laundering, fraud and drug operation to become the ‘Mr Big’ of Wales. The money laundering penalty, in this case, was a 24-year prison sentence in 2006, which was later reduced to 21 years. Evans conjured up an investment fraud scheme to attract investors for his ostrich farm business. It is estimated that, from this scheme, Evans laundered £37 million across Europe and the UK. However, after the opportunity to visit family after six years in prison, Evans went on the run for over three years before finally being reprimanded from a South African housing complex.
As you can see, money laundering penalties and regulations are exceptionally complex. If you have been accused of money laundering or are representing a client facing a money laundering sentence, please don’t hesitate to get in contact with one of our fraud barristers.
Chambers is centrally located within walking distance of the train station, secure car parks and the Courts.
St Pauls Chambers
Park Row House
19-20 Park Row
Leeds
LS1 5JF
For out of hours assistance please call the senior clerk on 07854170429.
The switchboard will open from 08:30 until 17:30
Phone: +44 (0)1132 455 866
Email: [email protected]
CJSM: [email protected]