We probably need it to prop our ecomony up to be honest........
Bank fined for being hilariously sloppy about its money laundering.
- Thread starter Angilion
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We probably need it to prop our ecomony up to be honest........
Aye, getting the worlds criminals to pay their taxes in the UK
There were reports afterwards that said the liquidity from the global drug traffickers helped prop up the worlds financial system after the 2008 crash
The pedantic correction is that money laundering isn't about creating a fake legal explanation, it's about create multiple layers of real legal explanations that obscures the underlying illegal source.
In this case the goldsmith had a very real source of the cash - they sold gold for cash. What they didn't bother doing, and the NatWest didn't bother to care about, was to ask at any point why people had so much cash. The immediate legal explanation is very much not fake.
Obviously I may be placing too much emphasis on your wording, particularly "fake legal explanation".
Edit: the only reason I care is because I have to apply these rules in my day job
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The pedantic correction is that money laundering isn't about creating a fake legal explanation, it's about create multiple layers of real legal explanations that obscures the underlying illegal source.
In this case the goldsmith had a very real source of the cash - they sold gold for cash. What they didn't bother doing, and the NatWest didn't bother to care about, was to ask at any point why people had so much cash. The immediate legal explanation is very much not fake.
Obviously I may be placing too much emphasis on your wording, particularly "fake legal explanation".
Edit: the only reason I care is because I have to apply these rules in my day job
I disagree with that because at some point in money laundering it's necessary for a legal explanation to be applied to money it doesn't actually apply to. Which I think makes that explanation fake. In more sophisticated laundering schemes there may well be multiple layers of genuine explanations and movements of money to obscure the key one, the one that involves a fake explanation, but I don't think that makes the fake explanation real. I think it's just using real explanations to obscure the fake one.
I think it's akin to deliberately burning a property down to claim on the insurance and saying the fire was caused by an electrical fault. An electrical fault is a real explanation for a fire, but it's not the real explanation in this example. In this example, it's a fake explanation.
Did the goldsmith in this case really sell up to £1.8M worth of gold per day from their apparently quite small shop? Or was that just what they put through the books? They don't seem to been doing a very good job of obscuring anything.
No it doesn't. Simple real world example:
1) Illegal source of money (say drug dealing).
2) Go buy second car at dealership for £1,500.
3) Not enough to flag under AML rules.
4) No need to give reason for source.
Money has started to be laundered with no need to create fake explanations.
At a small scale it's relatively easy to do. Buy normal things with cash, e.g. weekly shop. It's large amounts that are an issue and require either a complicit trader who will work with the criminal to create a fake legal explanation or a negligent trader who doesn't bother to check or doesn't sufficiently check (e.g. say a trader who only asks if the money belongs to the person).
That's just spending a small amount of cash, you could do that by paying with cash for any number of things.
Is a criminal buying his new TV in cash using his crime money laundering? Seems a bit dubious.
On the other hand, if a criminal were to get into the second-hand car business then... However, that would tend to involve some fake legal explanations for some of the cash flowing through that business.
HSBC survived laundering money for drug cartels.... I bet no one got jail time
you probably can't even put a few K in your bank without raising a flag
for the banks it seems like the rewards are worth the fines almost
It is money laundering. And the attitude that it's not that leads to lax business practices and can lead to legitimate businesses letting that low level laxness become more endemic in their business and can lead to much larger scale money laundering. It's far too easy for someone to build trust with low levels of cash transactions and gradually increasing it until large scale/true money laundering is happening and the trader is negligently involved because they're a long standing customer/supplier and doesn't check when amounts increase.
Again it wouldn't need fake legal explanations. It would need intelligent planning which I'm not going to post details about because of the obvious risk that someone could use it as a fraud manual.
To be clear, I'm an accountant. My primary business risk isn't money laundering with fake legal explanations because if the explanation is any good I should never be able to spot it. It's the other side of the coin which is where I need to be most vigilant.
I don't see how simply purchasing an item using cash is money laundering tbh.. and you're just asserting that it is without providing an explanation for why.
That's a bit of a cop-out tbh.. you can surely argue the principles here.
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Here we go... everyone brace yourselves...
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What's the point of money laundering? To place layers between money illegally obtained so that the illegal source can't be traced. What's the easiest way to utilise money while leaving no trail? Cash.
Using cash for money laundering is literally a textbook example. Bear in mind I do annual training on AML, so when I say textbook I mean these are basic examples given in my courses. Technically online so more of a slide than a textbook but I think you'll forgive my wording.
The simple principle is the oft repeated joke to accountants of "one set of books for the taxman, and a real set of books for me...". That is a high level principle and about as far as I'm comfortable going.
Yes, but your example was literally just spending cash...
That doesn't seem to be the full picture, a large cash transaction is perhaps something that from an accountant's perspective businesses need to watch out for re: money laundering but that's surely just one part/layer. Criminals engage in money laundering because they can't just pay with cash for everything, no explanation for where all their cash came from, they'll get caught out ergo the need to launder funds.
I don't think Angilion was really off the mark with his description and I've not seen anything so far to change that.
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I'm in trouble now!
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The issue with you and Angillion is you have a preconceived idea what money laundering is, and it's almost Hollywood-esque. Spending cash is literally a money laundering offence. See POCA 2002 s.327 1(d), noting that "criminal property" is any property deriving from criminal conduct (POCA 2002 s.340 3) which could mean drug dealing, or it could mean tax evasion.
What I'm pointing out is that money laundering is far wider than the media driven reporting. You paying a trader in cash is likely going to be the start of a money laundering chain. The fact people turn a blind eye is an issue. There is likely to be money laundering in that chain. The fact is no one is faking an explanation because no one will bother to ask a question. And not bothering to ask a question is just as much an issue as a fake explanation.
Honestly, I can't provide more concrete evidence that what I'm talking about is money laundering other than referring to the criminal offence of money laundering. So if that doesn't satisfy you then so be it!