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Expired ingredients of an illegal cocktail

Expired ingredients of an illegal cocktail: Banks, Commercial industry, Privacy right and the cost of business

On the word of Drage “money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If done successfully, it also allows them to maintain control over those proceeds, and ultimately provide a legitimate cover for their source of income.” Unfortunately, through passing of the years the launders gained experience in the field of ML and it’s now much easier for them to create new methods of deceiving. This section is going to examine the efforts made to enforce laws against laundering as a method of reducing crime.

The legal measures taken so far and the launders who failed to “complete” their task successfully provided money launderes with examples and ideas of what to be careful of. It’s a chaotic field. However despite all the improvements that can achieve in committing the offence two stages are remaining the same. Those are the Layering and Integration stages explained in chapter two. This is due to the fact that the launders will seek for the law enforcement consent for there continued possession of the assets in order to avoid the risk of prosecution for the crime. The main concern is not greatly focus on the disguising of the origin of money but with concealing its destination and the purpose for which it has been obtained. Hence the easiest way of doing so is through the deposit or exchange of the money by using the various financial institutions, bureau de change, companies, real estate offices, art exchange offices et cetera. Accordingly since the early 1990’s, ML has become major issue for national authorities and financial institutions. Theoretically speaking, the legislators are well informed about these issues.

Money laundering is ipso facto illegal. As seen in the previous chapter, a numerous interventions have been “undertaken during the past 15 years in order to control and reduce the amount of criminal proceeds laundered through banks and financial institutions.” The offence of ML covers a wide range of actions. For instance a person who commits theft of any kind, say from a clothes department store, commits ML since he possess an asset which deprived from a crime. As has been previously mention the legal framework is covering not only bankers but also lawyers, auditors and many other professional advisers who deal with clients who are possible of being charged with such offences . However the focus on the banking sectors was a logical response to the nature of banking. The earliest nature of a bank was taking in deposits and making loans. Of course the modest bank altered beyond this simple description. Now it’s a “multi faceted financial institution, staffed by multi skilled personnel conducting multi task operations…which had to re engineer in the face of growing competition from non bank financial institutions, and fast moving communication technology.” This argument is based on the theory that almost “all profit driven criminal activity is done in cash (i.e. drugs, prostitution, extortion, etc), and that criminals need to get their ill gotten gains into the banking system.”

In the meantime at international level the anti money laundering mechanisms “have evolved embracing other legitimate activities not protected by any anti money laundering regulation.”

To that end both the growing competition and the communication technology improvements are the main pillars of the money launders methods.An international financial centre that is used for money laundering can become an ideal financial haven. Developing countries, such as the UK, “can easily attract ‘dirty money’ as a short term engine of growth can find it difficult, as a consequence, to attract the kind of solid long term foreign direct investment that is based on stable conditions and good governance, and that can help them sustain development and promote long term growth. Money laundering can erode a nation's economy by changing the demand for cash, making interest and exchange rates more volatile, and by causing high inflation in countries where criminals are doing business.” All these evidence induced the policy makers and the law enforcement agencies to develop new mechanisms for detecting when legitimate businesses are being polluted by money laundering attempts or involvements.

As has been mentioned in the previous chapter illegal money can be moved by all manner of means. The globalization of financial services triggered various techniques available for money launderers to utilize the financial system to launder their money. First of all is through the banking sector: this technique entails account in fake names or held in the name of relatives, the use of shell companies and hiding the beneficial owner, internet transfers, cashier’s checks, loans, transferring the illegal proceeds to another country, the making numerous deposits of small amounts below a reporting threshold, usually to a large number of accounts . Secondly is through non Bank Financial Institutions such as Bureau de change and “underground banking” activities. This technique become more popular nowadays since the banking sector anti money laundering mechanisms are becoming increasingly effective. Non Financial Businesses or Professions extends beyond banks to lawyers , auditors, real estate offices, casinos, art galleries, jewelers across the boarders, car dealers and certain insurance companies.

Focusing in the UK’s anti money laundering legal framework imposes on financial institutions to establish AML programs to detect certain transactions and report suspicions. The UK AML regime is based, as mentioned in the previous chapter, on the Proceeds of Crime Act 2002 and Money Laundering Regulations 2007 which they take a fundamental consideration of these factors. Part 7 of the Act imposes certain duties on businesses within the regulated sector regarding money laundering and sets out rules for the processes of investigating and confiscating suspected criminal property. The Financial services Authority sets high level requirements for the regulated sector institutions to have their own risk based controls on ML. In the last decade of the 20th century, technically all the financial services, employees, companies and in general all the regulated sectors are legally forced to report suspicious activities involving money or any other kinds of assets prior their own involvement in such an activity. Part 7 of POCA begins by establishing three areas of activity that mean a person commits an offence:

• Concealing, disguising, converting or moving criminal property;
• Entering an arrangement that is known or believed to aid the acquisition, use or control of criminal property; and
• Acquiring, owning or using criminal property.

Due to the fact that the financial institutions, such as banks, deal with other people's money, they rely on a reputation for probity and integrity framework. Making the devil advocate these are reasonable policies. At this point it should be stated that the focus of this paper is on the statutory privacy rights where none exist constitutionally especially when it comes to the disclosure of records in the possession of financial institutions. The warrant applications and probable causes extend the scope of this paper. Taking into consideration that banks are the core actors in the anti money laundering regime they are required to have comprehensive anti money laundering compliance policies and they are subject to federal supervision and monitoring. However under the Act not only banks but all the financial institutions and any other business under the regulated sector are now under an obligation to employ anti money laundering mechanism . Such mechanisms embrace the duty to search for suspicious transactions conducted by their customers and report them to the authorise person , who is often the director or department manager of the institution in question. If the authorised person considers that indeed the transaction made was suspicious is under the obligation to report the incident to the Serious Organized Crime Agency (SOCA). Under section 327 of the Act a criminal offence is created when a person knowingly conceal criminal property. According to section 328(1) a person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person. The customer in question is not given notice that his account is under investigation by the bank, nor that the suspicious transaction have been reported to the police . Such act will point the finger of suspicion and lead to self protection actions by the client. In fact, it is illegal for the bank to provide any kind of notification to the customer in question. Under section 330 it is an offence when a person in the course of this business in the regulated sector knows or has reasonable grounds foe suspecting that someone is engaged in ML. These measures are expanded to lawyers , auditors and to any person in authority. Nowadays the banks and other financial institutions are merely bound by law enforcement. Failure to disclose constitute is incompatible with the Act and results in civil and criminal penalisation. It is an offence under section 331 where a ML reporting officer who receive a report which give rise to reasonable ground of suspicion for ML fail to report it to the SOCA. Under section 329 of the Act the acquiring, possessing or using another’s criminal property without adequate consideration consider to be a criminal offence. In addition, under section 333 of the Act the tipping off about a report or investigation into a suspected money launderer amount to criminal offence.

Nonetheless the stronger emphasis is placed by the legislators on the core financial institutions i.e. banking sector. There are four pillars under the Money Laundering Regulations 2007 that need to be addressed when it comes to ML prevention measures that need to be employed: customer due diligence , nomination of officers , reporting and records maintenance requirements , and training of the stuff . The importance of POCA compliance cannot be overstated. If they failed to comply, they might be convicted to a maximum penalty of two year imprisonment and/or fine might be imposed. Moreover a criminal offence is punishable with a maximum penalty of five years imprisonment and/or a fine under section 334 of the Act. The failure of disclosure that aimed the ML knows as “tipping off” is punishable under section 333 of the Act. The earliest case of infiltration closely resembled on the issue is the case of Bowman v Fels in which the Court of Appeal held that “section 328 does not extend to the involvement of a barrister in the ordinary conduct of litigation or its consensual resolution and that even if it did the section would be subject to a full saving for common law legal professional privilege (LPP) notwithstanding the absence of any express statutory saving for LPP in that section.” Yet, a lawyer within the regulated sector must comply with sections 328, 330 and 333 and with the Money Laundering Regulations 2007. Nonetheless the paradox is that if the accused person in question manage to prove that the reason for the failure to comply with the anti money laundering regimes was the fact that his company did not have the right control mechanism in place the focus will be placed on that argument rather than the actual knowledge of the illegal activity and the Financial Authorities is more likely to place a financial penalty rather than imprisonment for it.

The Act provides various defenses under Sections 332(6) , 333(2) , 327(2) , 328(2) , 329(2) accordingly with the accusation in place. One of the main defenses is when it can be proved that the person in question made a protected disclosure under section 338 of the Act or if there was a “reasonable excuse” for not disclosing the information then his is not liable. Unfortunately there is lack of clarity on what a “reasonable excuse” is and there is no relevant law to assist at the moment. At this point one can argue that the exception provide an escape way for the criminals rather than actually aiming their penalization. From the one hand that is correct. From the other hand this gateway policy has to be there since it’s a civil liberty of the people committing crimes as well. Fair or not criminal are subject to human right protection as well. To sum it up, a failure to comply with the regulations results in multiple punishments but at the same time protecting measures for the people involved out of ignorance are available.

In treating a report as having reasonable ground for suspicion the prosecutor needs to be able to find sufficient and direct evidence in order to proceed with the case and make any potential arrests. In the absence of such evidence nothing further can be done. There is no common law right to “strip criminal of their property.” The police have no right to retain those assets beyond the end of the trial unless there is a statutory power to do so
If the case successfully proceeds to litigation and the court finds the accused guilty for the offence of ML, then confiscation orders can be available, if any assets can be recovered. Confiscation of proceeds is the “first and most important legal tool for depriving offenders of illegal profits…which is often looked upon as a civil, reparatory measure…”

However In the reactive model, the anti money laundering mechanisms operate under logical algorithms. By that it means that the suspicion bells will rink in cases where a small company or a small restaurant with a limited number of customers out of sadden submits a disproportionate amount of profits. A small company can produce a certain amount of profits per year. A reasonable person expects to see a gradual improvement of profits by the passing of year, yet the amount of increscent profits has its limits. For example if a new restaurant which most of the times is empty make profits that cannot be supported by the amount paid by its customers or suddenly doubles its profits will raise some doubts about its credibility. Based on this theory If such a scenario operate then it’s logical for the person in authority, for instance the auditors, to question the source and the reason for the sudden increase of profits. Factors such as the age of the company, the company balance sheets, the multiple head offices (if any), the location of the company, the size of the company, the number of public contracts in a year, the education qualification of the company’s legal representatives, the number of subsidiaries, the age of the company’s legal representative and the number of branches he or she represents are all factors that are taken into consideration and can raise suspicion for illegal activities. For examples the auditors need to suspect that a legitimate company is not logical to gain such amounts as profits while hardly having any customers.

The law requires financial institutions to assist the government agencies to detect and prevent money laundering and demands from the entire regulated sector to focus on customer identification and transaction monitoring as internal control mechanisms and to adopt them into there every day economic transactions. Especially banks are under the obligation to elaborate on the “Know your Employee” system before opening an account as well as with the “Know your customer” . Broadly speaking the illegal proceeds become most visible when they are first introduced into the financial system. As a result, anti money laundering laws often require bankers to identify money that may be tainted. They need to know their clients past and present, monitor their accounts movements and they need to maintain records of any unusual and suspicious transaction that might operate and report them to the person in authority. That person will investigate the issue in depth and if he considers that the transactions are suspicious will report them to the police. The question here is what can constitute a suspicious transaction? The anti money laundering mechanisms operate under logical algorithms. By that it means that the suspicion bells will rink in cases where a small company or a small restaurant with a limited number of customers out of sadden submits a disproportionate amount of profits. A small company can produce a certain amount of profits per year. A reasonable person expects to see a gradual improvement of profits by the passing of year, yet the amount of increscent profits has its limits. For example if a new restaurant which most of the times is empty make profits that cannot be supported by the amount paid by its customers or suddenly doubles its profits will raise some doubts about its credibility. Based on this theory If such a scenario operate then it’s logical for the person in authority, for instance the auditors, to question the source and the reason for the sudden increase of profits. Factors such as the age of the company, the company balance sheets, the multiple head offices (if any), the location of the company, the size of the company, the number of public contracts in a year, the education qualification of the company’s legal representatives, the number of subsidiaries, the age of the company’s legal representative and the number of branches he or she represents are all factors that are taken into consideration and can raise suspicion for illegal activities. For examples the auditors need to suspect that a legitimate company is not logical to gain such amounts as profits while hardly having any customers. Similarly banks operating through computer programmes. The computer will alert the bankers about any transaction that might operate with amounts more than a specific amount of money that the institution considers as suspicious. After that the appropriate steps will be taken. In relation to the popular notion that Internet provides new and undetectable methods of money laundering, technology itself creates limitations. These dated check systems create more secure means of moving financial information.

Further on all the regulated sector needs to designate the gatekeeper who will be responsible for the implementation of the anti money laundering procedures and in position to block it. Failure to do so will be subject to sanctions such as withdrawing of licenses, professional disqualification, criminal or civil proceedings. Beyond that the authorities have little leverage to supervise, to check the reporting requirement or to punish noncompliance.

Additionally there is a wide range of requirements that they need to comply with. For instance they need to introduce and enhance automated transaction monitoring systems for monitoring, detecting and investigating suspicious transactions, filling timely reports about them, instituting innovative training techniques and programmes for the personnel, identity checks, record keeping etc. Such forms of training are “delivered generally through a mix of desktop and CBT methods. Firms rely largely on traditional approaches and on self certification that the training has been delivered. There is little evidence to gauge the effectiveness of such training.”

All these requirements of good practise constituted the internal anti money laundering control mechanisms that need to be adopted by the regulated sector. These mechanisms provide the framework on which employees and people with authority will base their efforts of combating ML. It is important to note that these legal mechanisms provide a constant improvement in the regulated sector performance since the quality of the reports and the number of the operations that have been reported is getting redoubled. Before the creation of the anti money laundering rules there was a chasm in the global governance of ML. However the truth of the matter is that despite the benefits that these mechanisms provide, they do not luck of shortcomings.

In the battle field of anti money laundering: what seems to be the problem

Measuring the benefits of the anti money laundering rules one cannot dismiss the difficulties arise for the developing of such regulations. Knowing the regulations and be willing to apply them is not enough. In order to do so, there are some significant consequences that flow from the architecture of the mechanisms and the surveillance of them. Despite the gains from having AML controls, there are numerous costs that need to be considered as well. This section is going to address some of the main problems that arise with the application of the anti money laundering rules.

One of the main problems faced by the AML regime is the cost of business impact. The willingness to comply with the anti ML rules cause is highly costly and the benefits are not clearly perceived. All the institutions under the regulated sector need to pay for the implementation of the anti money laundering policies and the creation of the appropriate mechanisms by there own funds. In order for the regulated sector to comply with the anti money laundering rules lots of money need to be invested into the monitoring controls, the training and recruitment of the employees, the person in authority responsible for investigating the suspicious cases, identity checks , record keeping, apply the “know your customer” principle, the set up of internal control procedures and expensive computer equipment for systematic and comprehensive supervision/monitoring and the list can go on for ever. The enforcement of these measures has an economic impact on the business. Nonetheless the government beyond the provision of the compulsory legal framework do not contribute economically to its enforcement. Thus the customers of the institution in question would be the “victims” of the whole issue since in the price that they are going to be call to pay for the services provided a “hidden” fee for the creation of those mechanisms would be paid as well. The effective cost of the anti money laundering services is not clearly reflected in the price charged but there are no other alternatives for them rather than doing so. That is clearly not proportionate especially for the legitimate customers who have no intention of committing fraudulent activities of any kind.

On this essence in 2003 KPMG and PriceWaterhouse Coopers provided a partial cross check on costs of business. The amount of £90 million was estimated as the current cost which is excepted to rise as the number of sectors covered is increasing.

However viewing ML as a market, if ML is more expensive then the drug dealer for instance will face costs for the performance of their “services” and the charges will be higher, thus the consumption of drugs will be reduced. In this way the organised crime burdens will be pressured. But again that is based simply on a theoretical algorithm. The improving of law enforcement efficiency does not guarantee the reduction of predicate crime.

Nonetheless the cost of business is not calculated in terms of economic implementation but from the emotional resistance and practical difficulties of ordinary citizens. By this I mean the difficulties they face when it comes to the opening of an account in case the lack of a single identification documents on their own names which is required by the anti money laundering regulations, “even though their intended business is small and not remotely connected to the transnational crime activity which they (...) associate the term ‘money laundering.’” To put it simply it raises the price of the services and add extra time and costs for the customer to find a provider of the service.

Another problematic area of AML is the issue of privacy Right and its compatibility with the Human Rights Act 1998(HRA). People who deposit their money or any other assets into a financial institution they need to be reassured that their privacy right will not be infringed in any way and they deserve this right at the end of the day. From the other hand though some people with illegal intentions might take advantage this privilege and use it as a camouflage of their illegal actions. In effect, in most of the cases courts argued that the AML is compatible with the HRA, for instance in Benjafield v Rezvi in which was held that there has been no violation of Article 6
Moreover all the institutions under the regulated sector are not allowed to inform a business or consumer that a Suspicious Activity report is being filed. These forms include detailed information about the individual's bank account number, name, address, and Social Security Number. Certain important safeguards are not preserved. Despite the fact that the Financial Services Authorities point out that their rule on treating customers fairly applies in each dealing with customers, albeit this does not seem to work in reverse. There is legal ppressure to reduce privacy rights for the sake of the greater good called AML regime. However obtaining information under the cloak of confidentiality is repugnant and disproportionate. There is an issue of fate of confidentiality. Focusing in the banking sector the term bank secrecy means “any action with a banking character, especially the existence of bank client relationship, information furnished by a client regarding his financial situation, his relationship with the other banks and information received concerning transactions with third parties with other banks.” What happens if the information is not kept secret, but disclosed to others? What if the bank accounts which are being monitored can be shared with other collaborators? What keeps the media out of such scandals? Where is the line of accusation drawn? There is a Human Rights Act implication here. It might be a risk of great injustice.

Beyond these controversial issues, there is the surrounding of the risk based approach to AML which was introduced by the 3rd AML Directive. This approach is an attempt to “control both the interactions and communications for the purpose of improving bother the AML system…and the outcome of its interactions with other systems.” To estimate risk successfully the total number of money launderers is needed which is actually not available. These numbers are statistically impossible ever to be found. Some figures are available but nothing guarantees that they are proportionate. Thus there can be no such thing as non risk based approach. As a result this risk based approach is based upon the distinction between suspicious and non suspicious cases and using the limited resources available in dealing with the higher risk cases which are likely to have better outcomes. This by itself runs the risk of leaving aside the smaller institutions which sometime may entail bigger dangers than the big ones based on the theory that small or medium sized organisations is easier to control. An example on this reasoning is the attempt of the POCA to focus on the transactions of bigger banks rather than the smaller ones. An effort which did not resulted in the level it was expected to do so. To sum up, in the AML the risk based approach raises the possibility of mistakenly collapse “into the condensed form of non suspicion only, which raises the possibilities both of leaving a set of truly suspicious cases unreported to the Federal Advisory Council and of reporting innocent individuals as suspicious.”

Moreover risk analysis tools are “far from being fully implemented by law enforcement agencies, mainly because they require a change of perspective from a reactive approach to a proactive one. This is a lengthy process, but it should be nevertheless supported through the development of increasingly accurate and easy to use risk assessment models.”

Between these lines “the relationships between domestic and foreign banks may incur a heightened risk of money laundering international correspondent bank accounts may pose increased risk of potential illicit activities, including money laundering.”

Nonetheless the plethora of ML methods “makes it difficult to develop regulations that are truly comprehensive across institutions and that also reflect the risk to society that those different sorts of institutions pose though money laundering activities.”

Legal profession is not an exception of risk. Even though “lawyers like to deny it, there is no doubt that they assist criminals and money launderers, sometimes with full knowledge of what they are doing but also unwittingly.” When it comes to the legal profession despite the onerous and costly “effects of compliance with an even growing burden of regulation are now being left” poses a big problem for lawyers. It raises an issue of confidentiality and threat to civil liberties and challenge the professional relationships with there clients. The law provides that duty of confidentiality is overwritten by the anti money laundering duty of disclosure. Yet, this does not make things easier. The moral and ethical dilemmas are still unresolved. An issue of incompatibility with Article 6 of the European Convention of Human Rights has been raised as well. The question here is whether the right of fair trial is breached. As Joal Wadsley argues “the right of fair trial depends on the right to access to a lawyer, both in civil and in criminal proceedings. In order to carry out their duties on behalf of their clients properly, lawyers assert...that confidentiality...is essential in order to get at the truth.” A fundamental case on this issue is the case of Bowman v Fels , especially for family law lawyers. In this case it was confirmed that the legal profession is subject to the disclosure requirements under section 330ACT but where appropriate they are not subject to the draconian effect of section 328 due to the protection of the legal profession privilege. The outcome of the case was a relief for the profession. The issue of confidentiality extends to auditors as well. In criminal cases it is unlikely that there will be frequent prosecutions of lawyers for laundering offences because of lawyer client confidentiality.

When it come to Companies such as real estate offices, commercial companies art galleries et cetera are not exception to risk either. There are thousands of companies obliged to fulfill the requirements of the anti money laundering regulations. However the evolution of ML infiltration has shifted towards more sophisticated forms of disguise which requires complex knowledge of how to run a company and how to submit an offer. In other words how to manage to run a company legally or at least to seem like you do. A contract nowadays involves many levels of intervention by several people and sometimes several companies. The situation of identifying any possible illegal transactions can often be chaotic. One of the main issues of debate is the business cost.

In addition one factor that present increasing vulnerabilities for ML is the creation of limited liability companies (LLC) in relation to their formation and operations which create a major hardship in ensuring that LLC are transparent enough to avoid any ML risks. Normally, there is no reason to suspect the transactions made by the companies. As a consequence, the AML regulations can only have a marginal effect in detecting money laundering.

Due to their unique statutory framework that provides them with the ability of operation through lack of transparency and secrecy are features that money launderers look for to conduct their laundering activities. The fact that LLC are easy and flexible to set up and there is no need for disclose the nature or purpose of their transactions facilitates in hiding illicit funds and at the same time the true identities of the owners of those funds. Another aspects that make LLC an attractive vehicle for ML is the “ease with which it can be created getting rid of all the red tape attached to setting up corporations which are riddled with rule and regulations...The LLC presents openings for raisings money for investments on either real estate or venture capital projects and there no limits and/or character requirements regarding the choice of additional investors” Furthermore is a good and legitimate way to wire transfers of capitals across boarders either directly or through banking transactions. Recent cases have shown that the money launderers “infiltrate pubic procurements by awarding subcontracts and jobs to their members and other economic activities related to public procurement.” Sometimes this has come “about through extortion or intimidation, but it is frequently the result of deliberate choices by enterprises, which accept these extra costs(...) as a toll to pay so that they can execute the main contract undisturbed.”

The law demands from companies to formulate best practices that incorporate values that reflect their compliance with the law. However, to date companies tend to comply with the law in fear of the legal consequences rather than from the desire to do what is right.

Beyond these reasons there are some other issues that knock on the effectiveness of AML regime. Starting with confiscation orders. Most of the illegal proceeds recovered by the judicial authorities are reinvested into the fight against ML. However there may be difficult in finding any substantial assets. The proportion of the recovered assets is remarkably low even though the probability of conviction is high. The statistics elaborate on the average of confiscated assets are pretty meagre. The UK Assets Recovery Agency for the period of 2002 2005 rated the assets recovered up to £159.000. In comparison with the high scale of scandals and prosecutions, this is a remarkably low rate if we consider that from 2005 onwards more institutions joined the regulated sector. There must “be much more, because we do not see everything.” It’s a vicious circle. Many cases “remained unclear whether money had been really ‘cleansed’ sufficiently to defeat court.” However confiscation orders can only be applied when ML activities are traced and prosecuted. ML is notable for the diversity of its forms, participants and settings. The public prosecutors capacity of prosecution seems to be lacking in developing economies. It does not require international transactions. It can be laundered in many ways. For instance clean money can also generate dirty money through tax evasion identification. Even if the money itself was lawfully earned, the sums that should have been paid in taxes are considered laundered. Thus there may be difficulty in finding any substantial assets. Once crossed the borders cannot impede the flow of information. Especially with electronically transfers there is no “tangible” property moved thus there is no basis for claims.

Another issue of concern is the trend of the “civilisation” of criminal law, for example possibility for civil recovery and confiscation orders. This means that the burden of proof is based on the balance of probabilities rather than beyond reasonable doubt. The reason for doing so is for lowering the hardship of burden of proof in hope of better outcomes. The big issue is the question whether such plan is weakening the protection that the AML regime provides. Principal writers take the view that there is no crystal clear answer to this. The turnover is not an actual profit in UK confiscation cases and it’s controversial issue under the HRA .

Moving on to the sector of conflict of interests, we find the maintaining of good reputation in the eyes of law which is an expensive task and the “forcing” the money launders towards “cheaper” forms of activities, for example tobacco, since the law enforcement makes it very difficult for them to remain in the ML industry. This conflicts of interest hinge substantially the development of an effective domestic AML regime.

In reality the people complying with the anti money laundering rules are driven to do so by fear rather than common sense or moral desire to actual contribute to the combat of ML i.e. the non executive directors fear not only the fines and the damage of their reputation but even for the revocation of the license to operate. In other words “you want to stay out of trouble? Then file a report.” If banks and the other institution under the regulated sector feel a “greater need to protect themselves against government sanctions by filing reports, the increase in numbers may not indicate improved diligence…The increase may be weakening the effectiveness of the regime in the process, by lowering the signal to noise ratio.” And this interaction results in the crucial question: What happens to the plethora of reports? Ending with endless bureaucratic processes is not going to help the development of the AML effort. The current anti money laundering regime aims “to regulate banks and officers in the corporate service sector to ensure that they make sure that the use, source and destination of funds do not involve money laundering thus forcing the launderer, motivated by his desire to have use of his tainted funds, to mislead bank and corporate officers” or simply to make the process of escaping the law so expensive for to them and give up on this sector choosing something less expensive to deal with. Prevention measures make it more difficult for the launders either to carry out there transactions or to obtain the fruits of there crimes. When it comes to the Police Enforcement Rowan Bosworth Davies believes that “the primary job of the police who investigate crime is to make arrests, and provide evidence that leads to satisfactory, and safe convictions…which is expensive, time consuming and riddled with potential pitfalls and problems. Arresting top criminals can be a career threatening move, these days.“

Furthermore, even though the European legislation has been simplified, the legal framework remains extremely complex and expensive. It’s complex because the various Directives need to be implemented into the national law and regulations of each Member State accurately. Overlaps among the various legislative measures often create loopholes that can be exploited to avoid controls.

According to many banks practitioners face difficulties in implementing the anti money laundering provision in everyday work and in using the control mechanism accordingly. The ambiguity of the legal regulations creates considerable obstacles for the financial institutions that have not only to interpret them accurately but to implement them into practice as well.

Most problems arise in regarding detection of unusual and suspicious transactions since the criteria of doing so might differ greatly from one institution to another. Even the interpretation of the criteria given by the legislators is often ambiguous. There is “very little empirical research either on the phenomenon of money laundering or on the controls to deal with it.” The question is when a transaction renders from unusual to truly suspicious. The phrase “knows or suspect” under the scope of section 327 329 is not defined. This test “might be problematic to apply where the defendant knows a number of primary facts but not all of them.”

In practise, the array of financial institutions over the years involved in the anti money laundering regime is impressive. The AML can truly be said to affect everyone in the UK. However the POAC has many shortcomings. It seems that when money talks, nobody notices what grammar it uses. The potential of having fewer clients might be overlooked for the sake of having a “valuable” client depositing a huge amount in their bank account and as a result to their pockets. Michael Levi argues that “it is easier to launder money with the help of someone inside a financial institution. Bank employees can be coerced or bribed not to file a suspicious activity.” Of course such behaviour can result in civil and criminal penalties against both the customer who seeks to have money laundered and the provider of the service. In addition the complexity of legal framework itself is not only expensive but it’s time consuming as well. The AML regime is expensive and raises issues of abuse of privacy rights for almost all the sections in the POAC. The complexities stem from the burden of proof on the courts is enormous but unavoidable. Yet, the main task of it is the control of the ML rather than be the prize winner. The question now is whether the anti money laundering legal measures taken so far are strong enough to identify such activities.

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