RegulationNov 16 2015

Scale of money laundering unknown: Commons report

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Scale of money laundering unknown: Commons report

A House of Commons research paper has admitted it cannot know the scale of the problem on money laundering.

But the 28-page paper said the UK’s money-laundering legislation had been successful at making the financial services industry more alert to the risks.

The paper said: “By its nature it is difficult to quantify what the scale of the problem is. The proceeds are hidden, and often only come to light in the event of prosecutions.”

The paper also admitted it was less clear whether the UK’s money-laundering legislation actually prevented crime or not.

It cited research by the United Nations Office for Drugs and Crime, which stated that the global detection rate of illicit funds by law enforcement agencies was as low as 1 per cent for criminal proceeds, and the seizure rate was possibly 0.2 per cent.

However, it added that at a technical level, the industry, in particular the financial services industry, did appear to be more at ease with the legislation than was the case previously.

It said: “Responses from a limited sample of industry representatives suggests that the new risk-based approach works and has made life simpler.

“The sector is getting better at knowing when to report and when not to, and, crucially, in retail sectors, appears to be providing better training for its ‘front line’ staff.”

While the UK performs well relative to other countries, it is estimated Britain is unlikely to have frozen more than 0.75 per cent of global corrupt financial flows a year between 2010 and 2012.

A Treasury report published in October stated that the UK’s financial sector was more exposed to criminality than that of other countries because of its scale and complexity.

It also found that the collective knowledge of UK law enforcement agencies, supervisors and the private sector around money laundering and terrorist financing risks was not yet sufficiently advanced.

The report said: “One of the priorities for the action plan will be plugging intelligence gaps, particularly those associated with ‘high end’ money laundering through the financial and professional services sectors.”

Adviser view

Alan Turton, managing director of Leicestershire-based Rowley Turton, said: “Tackling money laundering is very much a case of being alert and sensible. The procedures that are in place at the moment cover most angles, but if someone was determined to do something, most advisers wouldn’t pick it up.”

Key points

The financial services industry appears to be more at ease with the legislation than it was.

There is a feeling that public sector prosecutions do not match private industry’s considerable efforts.

Another concern is where companies have operations in multiple jurisdictions, efforts made in the UK are undone by lower requirements overseas.