How to spot the signs of money laundering

Money laundering is, essentially, about covering tracks.

Criminals take their ‘dirty’ money (earned through illegal activity) and make it ‘clean’ – i.e. make it look perfectly legal to law enforcement. To achieve this, they may look to use your services, and you could unwittingly help them in avoiding the law.

The purpose of money laundering is to not draw attention to what they are trying to do, so it is unlikely that a criminal will come to you waving a klaxon and making a fanfare announcement of their intention to use your services for dubious reasons.

In fact, criminal commercial enterprises are likely to look more legitimate than any other business in order to continually maintain their appearance as a ‘clean’ business. Criminals capitalise and exploit your trust at best and your naivety at worst.

There are some telltale signs to look out for. These should be considered in the context of what you know about the client:

No clear reason why the client has chosen your firm

While it might be flattering to be contacted in your rural firm by a big city business seeking to use your services, it should perhaps ring alarm bells. If you don’t advertise widely, or routinely deal with customers over the phone or via email, then there is a good chance that this prospect is a criminal seeking to capitalise on your naivety.

A lack of all the information

The client keeps putting off providing information needed to facilitate due diligence, no matter how much you chase them.

Complex ownership structure

You’ve looked at the business structure, but it makes no sense to you. If you are instructed by an individual who seems to have no controlling interest in the engagement but appears to be controlling the company, ask yourself why this might be the case.

Unnecessarily complex transactions

Engagements seem ridiculously intricate, with little or no commercial reason for the activity being undertaken. For example, this could include cross-border transactions with gaps in the flow of information.

What to do if you suspect a client of money laundering

You are legally required to report this

Either report your suspicions to your nominated Money Laundering Reporting Officer (MLRO) if you are working for a firm, or to the National Crime Agency (NCA) if you are MLRO for the firm.

Explain your suspicions

When reporting, you must indicate the reasons why you are suspicious, providing as much information as you can around the individuals in question. You should explain why you believe there to be a proceed of crime at the heart of your dealings with them.

You must take action

If you don’t, you may be committing a money laundering offence under the Proceeds of Crime Act 2002, you must seek consent from the NCA to proceed with the transaction by submitting a Suspicious Activity Report (SAR) before acting. In doing so, you must explain exactly what offence you are being asked to commit and provide information about the proceed of crime at the heart of this transaction.

Disengage

Break contact with the client as soon as you can, to avoid inadvertently committing a crime yourself, or tipping the criminals off about your suspicions.

Tania Hayes is AAT's Head of Professional Standards & Strategy.