Police chief says accountants turning a blind eye to money laundering

Hear from Commander Karen Baxter, Head of Economic Crime for the City of London Police, on how accountants need to do more to combat money laundering.

After 27 years in policing, dealing with serious and complex crimes like murder, kidnap, terrorism and child abuse, I’ve seen the worst of it. I moved from the Police Service of Northern Ireland to be the Head for Economic Crime on 1st July 2018, coordinating 43 forces and nine organised crime units on how they respond to fraud.

We’re seeing huge growth in fraud

The financial world is a very interesting place with many different stakeholders (accountants, banks, solicitors, the public and private sectors) and a wide range of systems. Historically, law enforcement hasn’t always worked closely with all of these but in a move towards great collaboration, the National Economic Crime Centre is now making a move to join up law enforcement and the private sector, sharing assets and information.

The main reason for this is the huge growth in fraud. It’s the fastest growing crime – up 35% in five years with an estimated 3.8 million frauds committed last year, costing the economy £193 billion. And where does this money go? It goes to funding criminal lifestyles and serious crimes like sexual exploitation, the trafficking of young women, the sale of drugs and to street gangs.

Fraud is not a “victimless crime”

For too long fraud has been seen as a “victimless crime”. People in society, law, banking, finance and accounts, and even policing have (with some ease) divorced the fact that laundered money often comes from individuals losing their earnings, their security and their pensions with a hugely detrimental impact on lives. Often it will be linked to criminal networks that cause more loss of life than terrorism. Vulnerable young people are being targeted online to become money mules and allow their bank accounts to be used to clean money which can be a step into criminal offending. 

The role accountants play

Less than 2% of Suspicious Activity Reports (SARs) last year came from accountants which seems unusual given that they are the people dealing with money every day, they are experts at seeing how it’s moved and patterns of behaviour, which may well indicate something suspicious.

We will prosecute the criminals that are causing the most harm and at the moment information is sitting in different silos. We are working hard to bring that information together to better identify offenders and bring them to court.

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The importance of regulation

Another big problem we have in the finance sector is that anyone can turn up on the high street and say they’re an accountant or tax advisor. We have cases where people use this loophole as an opportunity to defraud people. We need to look at disqualifying them from setting up a business and engaging in financial advice in the first place. Strong regulations have to be part of this for prevention.

There is the need to look beyond the regulations too. You can be a good accountant, demonstrating that you are meeting the requirements and being compliant but do you ask enough questions? Are you looking past the minimum requirements and at the individual? If a company turned over £1million last year and jumps to £2million this year without much change to their business, are you researching this a bit further? The ICAEW already conduct checks on businesses and that is to be encouraged. With the growth in fraud, it probably needs to increase in the future.

Banks are upping their game

The banking and private sector are now beginning to have a level of understanding about the implications of these crimes and are determined to work hard to stop fraud. They have a voluntary code that if someone is scammed through push payment fraud, the bank will undertake to pay that back, within certain conditions and where people have taken some degree of diligence. Collectively there is a priority to better understand and target the criminals behind these cases.

It’s not free money. We will all pay for it in charges and eventually as part of losses to the economy or to life.

Act if you have a suspicion

If you have a suspicion about transactions you can input intelligence through a Suspicious Activity Report (SAR). If you don’t do this you’re leaving yourself open to investigation. If it doesn’t meet the threshold but you have a concern you can also report it to Crimestoppers.

We all have hard decisions to make as part of our professions but if we don’t all take responsibility, criminals will erode the very fabric of our society.

Key takeaways

The responsibility lies with all of us to be more proactive, to consider our positions as professionals and how we can contribute. We need to start having more open discussions. Fraud is not just a police issue. Everyone can be a victim, and, with damage to the economy, will be a victim. Report any suspicious activity or you could be investigated yourself.

Further reading:

Sophie Cross is a freelance writer and marketer specialising in business and travel. She is the editor for London Revealed magazine and her clients include lastminute.com Group and Merlin Entertainments.

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