Money Laundering: A Practical Guide

Introduction: what this allegation means for you

We understand that being accused of and investigator for money laundering is a worrying and difficult time. We are here to help. In this guide, we will explain the law, the defences, and answer some commonly asked questions.

The law on money laundering serves two purposes. First, it criminalises people who assist offenders by helping them launder money. Secondly, it provides a gateway that opens up the prospect of money being confiscated by the state.

At its simplest, money laundering the process of taking money obtained through a crime and making it appear to be lawfully acquired money. Although it sounds simple, these cases often involve complex financial information, detailed analysis of bank accounts and allegations that money or property has been connected to criminal activity.

Money laundering is separate from the underlying offence that produced the criminal money. Thus, a person can be guilty of money laundering without being involved in the underlying criminal offence.

Being investigated does not mean that you are guilty. The prosecution must prove each part of the offence, and many cases turn on the detail of the evidence and the explanation for the transactions involved.

What does the law say about money laundering?

The first thing to note is that although the offence has the word ‘money’ in the name, it is not solely about money. Nor is there strictly speaking an offence called ‘money laundering’. Instead, the law talks about ‘criminal property. The Proceeds of Crime Act 2002 tells us that property is criminal property if it ‘constitutes a person’s benefit from criminal conduct’ and if the offender knows or suspects the property is the benefit from a crime.

It is irrelevant where in the world the criminal conduct took place, so long as the conduct would be a crime anywhere within the United Kingdom if it had occurred there.

The offences

There are a lot of offences that form what we commonly call money laundering, and we can’t possibly cover everything without turning this practical guide into a tedious academic textbook. We will cover the main points.

Because all of the offences involve criminal property, it is necessary for the prosecution to prove that the defendant at least suspected the property was the benefit from a crime. This was a small but important shift from the previous law on handling stolen goods, which require knowledge or believe that the items were stolen. The requirement for a mere suspicion is far easier for a prosecutor to prove.

Concealing criminal property

This is the quintessential money laundering offence. It is committed when a person takes criminal property and conceals it, disguises it, transfers it, converts it, or removes it from the UK.

Here we are talking about hiding the criminal property and making it appear to be legitimate. For example, by disguising a luxury car stolen as part of a loan application fraud as a legitimate vehicle to allow it to be moved out of the UK and sold abroad. It will also include moving money through crypto and banking systems to disguise the source of funds and thus the fact that the money is criminal property.

Arrangements

A person commits an offence if he enters into an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property on behalf of another person.

The point of this offence is to attack those who facilitate money laundering without actually taking control of the criminal property themselves – the deal makers of the criminal underworld.

Acquisition, use and possession

It is a criminal offence to take possession of criminal property and to use criminal property and even simply to be in possession of criminal property. This is an offence that was widely misused by prosecutors when it was first introduced as it is much easier to prove than offences such as handling stolen goods. Thus it became common to encounter people accused of handling a stolen jacket being charged as if they were part of an organised crime syndicate.

Failure to disclose offences

People working in certain regulated industries are required to disclose suspicions, as soon as practicable, that another person may be involved in money laundering to the authorities. Failure to do so is a criminal offence.

Tipping off

A person who works within certain regulated industries commits an offence if they let slip the fact that money laundering has been reported to the authorities or that an investigation into money laundering is underway.

The prosecution must prove that the tip off was likely to prejudice the investigation and that the regulated person obtained the information in the course of their work in the regulated sector.

This offence only applies to regulated people. A previous version that criminalised even telling somebody that an investigation was likely to happen and which applied to everybody except lawyers advising their clients was repealed in 2007.

What must the prosecution prove?

The exact legal requirements depend on the offence charged, but most money laundering cases involve two key questions.

The first is whether the money or property was criminal property. This is a two-part test. First, can the prosecution prove that the property was the benefit of a crime. This may be easy, e.g. John is seen stealing a car and stopped shortly after driving the stolen car. But it may be far more complicated, e.g. where a banking fraud is alleged. Usually though you would expect a money laundering prosecution to either accompany a charge for the main offence or be brought after a court has established that the substantive offence took place.

The second part of the criminal property test is to show that the defendant knew or suspected that the property was the benefit of a crime. This may be obvious, for example, you watch your friend steal a £150,000 coat from a West End store and then take it from them and wear it (real life case by the way), or it may be far more complicated. For this reason, the key plank of many money laundering cases is not whether the property was the benefit of a crime but whether the defendant knew or suspected it was.

Once the criminal property test is satisfied, the prosecution must then prove that the defendant did one of the things outlawed by the Proceeds of Crime Act 2002, e.g. concealing, arranging, or acquiring.

A person is not guilty simply because they handled property that later turns out to have been connected to crime. The prosecution must establish the required level of knowledge or suspicion and prove that the defendant’s actions amounted to a criminal offence.

Common defence strategies

Legitimate source of property

Put simply, the property is not the result of a crime and was lawfully and legitimately obtained. If the investigators can be persuaded of that simple fact, then they will not prosecute. Likewise, if the jury cannot be sure that the property is criminal property then they will acquit.

We dealt with a case in which our client was arrested following a raid on a safety deposit warehouse. He was not the police target but was caught up when police opened his box and found around £150,000 cash inside. An investigation revealed that he had lied about his income and employment on his mortgage application. The police prosecuted saying that he had obtained the cash as part of the mortgage fraud. At trial, we produced a witness who was able to say that a) he had previously been kidnapped and that police had prevented his family paying a ransom; and that b) he had given our client the money so he could pay the ransom should the witness be kidnapped again in future. There was thus a legitimate source for the money

Lack of knowledge or suspicion

A common defence is that the defendant simply did not know or suspect that the property was connected to criminal activity. For example, imagine that David is an art dealer who has a wealthy client called Anton with whom he has done business in the past. David agrees to sell a painting for Anton having been told that it is from Anton’s own collection and he has owned it for some time. David sells it to a private collector outside the UK. It emerges that the painting was stolen and David is investigated on suspicion of concealing criminal property by removing it from the UK. He will argue that he has a well-established relationship with Anton and had no suspicion that this piece of art was stolen. He will have a stronger case if he can show that he checked resources like the Art Loss Register, but that’s not necessarily essential if he can persuade the investigators that he acted honestly and in good faith.

In a case we dealt with, our client was accused of money laundering. She was observed paying money into various bank accounts in amounts just below the level that would, at the time, have triggered questions about the source of the funds. Her explanation was that she was assisting her partner who was involved in a legitimate hawala banking scheme as a broker. She asserted that she placed reliance on her partner and had no suspicions that the money she was paying in was criminal property. She stated she was familiar with the hawala system and saw no reason to be suspicious. The jury heard her account and acquitted her.

Lack of involvement

In larger investigations, several people may appear connected to the same transactions. A defence may be that the defendant had only limited involvement, acted on instructions from others, did not control the transaction, or did not personally benefit from it.

Challenging financial evidence

Money laundering cases often rest heavily on financial analysis. A defence may arise from careful examination of transaction patterns, account histories, the timing of payments, as well as assumptions investigators have made in reaching their conclusions.

Evidence that may help your case

As with so much in business, good record keeping makes all the difference. A defendant who can show evidence for the source of funds, that proper due diligence was undertaken, and thus that they had no suspicion of wrongdoing will be in a much better position than one who can only tell the court those things.

This may include communications showing why payments were made, documents showing the source of funds, business records, agreements, invoices or evidence of authority to carry out transactions.

It is also important to preserve documents and communications. Removing or deleting material can create further difficulties and may affect how the evidence is viewed.

Common mistakes

Assuming others see things as you do

There are certain people we encounter who have a very clear understanding of what has gone on and expect everyone else to see things the same way they do. Unfortunately, that rarely works out for them. It is important to have a clear understanding, be able to express that understanding clearly and corroborate your account with evidence wherever possible.

Giving explanations without preparation

In our experience, financial crime investigators enjoy two things: biscuits with their tea and spreadsheets. The people who go into that line of work are nearly always details oriented. They enjoy biting into complex financial data to produce a story about what went on.

They will spot errors, gaps and inconsistencies in explanations given to them. It is therefore important to be properly prepared for interview. Giving an inaccurate or incomplete explanation can create problems later in the proceedings, making early and thorough preparation particularly important.

Ignoring the importance of timing

Investigators often focus on what happened both before and after a transaction. The wider context — not just the transaction itself — can be central to understanding what occurred.

Trying to resolve matters directly

Contacting banks, investigators or other parties without legal advice may inadvertently affect your case. It is always advisable to seek guidance before taking any steps.

What sentences are available for money laundering?

The maximum sentence is 14-years imprisonment and the money laundering sentencing guidelines show that sentences can range from lengthy prison sentences of up to 13 years right down to fines.

The court will consider matters such as the value of the property involved, the defendant’s role, whether the offending was planned, the length of time involved and whether the defendant personally benefited.

Money laundering cases can also lead to confiscation proceedings, where the authorities seek to recover assets they say represent the benefit from criminal conduct.

What happens next?

Money laundering investigations can take much longer than many other criminal investigations because authorities may need to examine large amounts of financial and digital material. As a consequence, investigators at organisations like HMRC and the Serious Fraud Office can keep a suspect on bail much longer than the police can in less complex investigations.

You should expect to be questioned under caution by one or more investigators. In complex cases, they are likely to conduct multiple interviews. The first will often be at a relatively early stage to give you a chance to explain the situation and confess early if you are so inclined. Later interviews will take place once the investigators have a fuller picture of the allegation they are investigating. By this stage, you should expect the investigators to have a comprehensive interview plan ready. That plan is likely to include a scheme of staged disclosure that allows the investigator to simultaneously check the honesty of any account given and trip up a dishonest suspect. It is vitally important that you are advised in these interviews by an experienced solicitor who can help you put your position as clearly as possible without falling into any traps.

If charged, the case will proceed through the criminal courts. The first hearing will take place in the local magistrates’ court. If the offence is relatively straightforward and the sentence likely to be one that the magistrates could impose then it could be heard in the magistrates’ court at a trial hearing. If the allegation is serious and/or complex it will be sent to the Crown Court for a trial to take place there before a judge and jury.

How Chetwode can help

Money laundering allegations require careful preparation and attention to detail. It is important you are advised and represented by solicitors with experience of criminal law and dealing with sophisticated investigators.

At Chetwode, we can assist by advising before police interview, reviewing the evidence, identifying weaknesses in the prosecution case and ensuring your account is properly understood. We will help you identify a barrister of appropriate skill and experience for your case who can provide further advice and representation in the Crown Court.

Money Laundering cases are often decided by the detail. Early advice can help protect your position.

FAQs

Do I have to be involved in the original crime to be accused of money laundering?

No. A person can face a money laundering allegation even if they are not accused of committing the offence that generated the money.

Is receiving money from another person automatically money laundering?

No. The prosecution must prove the legal requirements of the offence, including the necessary knowledge or suspicion.

Can a genuine mistake lead to a money laundering investigation?

Yes. Investigations can arise from transactions that later appear suspicious. Whether this amounts to a criminal offence depends on the evidence and the circumstances.

Should I attend a police interview?

You should obtain legal advice before attending interview. What you say during an interview can become important evidence.

Next steps

If you are being investigated for money laundering, getting advice at an early stage is important.

A careful review of the evidence can help identify the real issues in the case and ensure that your position is properly explained.