The recent case involving Isabel dos Santos is an example.
A network of professionals, including management consultants, has been identified as helping Ms dos SantosLast month the International Consortium of Journalists released a trove of documents, calling into question the source of her wealth.
A network of professionals, including management consultants, has been identified as helping Ms dos Santos.
Embedded in the UK’s anti-money laundering (AML) regulated sector are banks, accountants and lawyers who must report suspicions of money laundering and remain mindful of the main offences of money laundering in the Proceeds of Crime Act 2002 (POCA).
The dos Santos developments and public allegations made in 2018 that management consultants were in the background of corrupt South African contracts highlight that they too have a noticeable money laundering exposure even though they sit outside the regulated sector.
This is of little surprise when considered that consultants are entrusted with coveted information on the assets, accounts and prospective investments of high net worth individuals and corporates.
In the UK, everyone is subject to the main criminal offences of money laundering.
These, in essence, prohibit interactions with ‘criminal property’, defined as a benefit of any kind from criminal conduct in the UK or elsewhere.
The touchstone is that the acts would be contrary to UK law.
Bribery and tax evasion fit the bill, alongside offences which may not be immediately recognisable such as environmental crimes or offences which arise where a business fails to obtain the requisite licence.
Debate over whether illicit property can be ring-fenced from licit property is overdue, but the current position is that property is ‘criminal’ if only one part derives from a criminal source.
Consequently, if 25 per cent of funds used to acquire a Basquiat is from tax fraud, the entire artwork will be considered illicit for the purposes of money laundering.
The breadth of the offences is tempered by a mental pre-requisite.
A person must actually know or suspect that they are interacting with criminal property.
But a defence of ignorance does not always lead to bliss.
Whilst knowledge or suspicion can be directly evidenced, in most cases there is no smoking gun.
Suspicion that, for example, the Basquiat was purchased partly from dishonest proceeds can be readily inferred from the circumstances.
For consultants, suspicion that the client seeks assistance in relation to what is ultimately illegitimately obtained funds or assets can be supported by myriad factors.
These include the nature of the dealings with the client, evidenced by regularity and content of communications as well as length and closeness of the relationship, the consultant’s possession of clearly false or at least questionable documents, unmitigated access to the client’s financial information, a lack of rational basis for contracts awarded to the client, their large sums of money or property acquisition, the existence of opaque structures, reputable press querying the client’s conduct and interests bought and sold at noticeable undervalue.
The real threat lies in the potential to be caught by section 328 POCA which criminalises being ‘in an arrangement’ facilitating the acquisition, use, retention or control of criminal property by another.
‘Arrangement’ is interpreted broadly, capturing a professional’s advice, as well as planning and executing transactions.
However, there are limits.
For exposure, ‘criminal property’ must already exist. Concern that property could become criminal if further steps are taken is insufficient.
For instance, if a consultant fears her client’s disclosures suggest that a lucrative contract might be procured through bribery in the future and is asked for input on how best to structure an investment if that contract is secured, there is no section 328 risk because – unless more is known – criminal property (that is, proceeds generated by a corrupt contract) has not crystallised.
A complete defence to money laundering is available to consultants where a report is made to the authorities or where there is a ‘reasonable excuse’ for not making one.
A report requires careful consideration as it will inevitably prompt scrutiny of the client and could hold implications for the consultant’s work in other jurisdictions.
To protect a professional, the scope of their involvement must be accurately covered in the report.
It is clear that consultants must become familiar with the money laundering offences to avoid becoming ensnared in an arrangement to launder. Training is key.
Whilst Ministry of Justice figures record that convictions for section 328 (arrangement) hover at around 225 per year as opposed to over 530 each for sections 327 and 329 POCA (transferring and using criminal property), the number of criminal investigations into professionals, including management consultants, is unknown.
The dos Santos case suggests that despite sitting outside of the AML regulated sector, they are within the scope of money laundering scrutiny.
