In the UK, the opportunities to place suspect wealth stretch far beyond super-prime property.
While the purchase of a luxury flat or country bolthole through an offshore shell company is a favourite of money launderers, investor awareness of property-based laundering has elevated following recent high-profile cases.
Flying under the radar are other interests of the high-net-worth individual. Lack of regulation, light enforcement or only an emerging understanding of risk means that these areas are attracting a flow of wealth into the UK, some of which is illegitimate.
Fundamentally, money laundering is the use and handling of property with a known or suspected criminal source.
The UK’s third national risk assessment of money laundering, published in December 2020, identified fraud and tax evasion as the most common type of underlying crime – but bribery, modern slavery, trafficking and, increasingly, cybercrime are also prominent generators of criminal proceeds.
Regardless of the commercial savviness of the wrongdoer, the enduring challenge is how best to paper over the origin of the funds so that they can be used within the legitimate economy.
Education and luxury goods
One such way that the introduction can occur is through the payment of fees and donations to elite private schools.
Foreign politically exposed persons are drawn to the UK for its safety, the sophisticated professional services on offer and, in many cases, the opportunity to educate their children at top schools.
A person’s PEP status always attracts a risk of background bribery and corruption, but understanding this and other money laundering risk factors, such as third-party payments, use of shell companies in paying fees and high-risk jurisdictions, varies widely across private schools.
Schools are not under the same regulations as professionals such as lawyers, estate agents and tax advisers, but they too are vulnerable to contact with money launderers.
Private education is worth billions to the UK economy and some schools will have been unwitting recipients of illicit wealth. The situation is sufficiently serious that in October 2020, the National Crime Agency issued an amber alert for bribery and corruption red flags in the independent school sector.
At the same time, it reported that 52.3 per cent of non-British children in UK independent schools have parents that are non-UK based. This figure suggests that there is likely to be complacency in some schools when fees arrive from an overseas account.
Another hidden area of money laundering is the luxury goods market. High-value dealers – defined as businesses that take cash payments in the sum of €10,000 (£8,700) or more – have been subject to anti-money laundering regulation for some time.
This, however, is a very broad category of business and understanding of money laundering is inconsistent. Family-owned car dealers, high-end wine merchants, jewellers, collectibles businesses as well as major luxury brands and top-end department stores are all grouped together.