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What is Anti-Money Laundering Law?

Compliance Knowledge Base | Anti-Money Laundering

Posted by: India Wentworth Published: Thu, 06 Sep 2018 Last Reviewed: Thu, 06 Sep 2018

Anti-money laundering (AML) refers to the fight against money launderers. Money laundering is something that damages the economy on a global level, but this doesn't stop individuals from getting involved with the money-making schemes themselves, resulting in a problem that isn't going away anytime soon.

AML is made up of procedures, laws, and regulations designed to stop the practice of generating income through laundering money. AML laws have a high level of authority within the business world, something that can be shown by the fact that institutions in the regulated sector are obliged to complete due-diligence checks on their customers, as well as maintaining regular reports, so companies know who they're doing business with. The responsibility falls on the organisations to carry out the required protocol and follows the laws surrounding money laundering.

The AML laws and regulations gained global recognition due to the work of the Financial Action Task Force (FATF). They help to maintain and promote a legally credible and stable financial market to create an all-round more efficient and profitable environment.

The recent addition of the new watchdog in 2018 works to strengthen the defences against money laundering. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) works alongside AML supervisors and law enforcements to improve cooperation as well as general standards.

Proceeds of Crime Act 2002 (POCA)

  • The prime focus of this Act is to recover assets that are gained through a crime, also known as the 'proceeds of crime'. One big change the act brought about was that the confiscation and recovery of the assets could occur even when there has been no conviction, speeding up the whole process of dealing with the recovering of assets.
  • The aim is to cut the criminals off from their motivations – money and assets. Additionally, the general legislation around money laundering was improved through greater understanding and clarity on the topic.
  • It has clearly done well too, as more than £746 million of proceeds of crime were seized, as well as £2.5 billion worth of assets being frozen, both steps that prevent the criminals from benefitting from their crimes and succeeding in their aims of laundering the money.

Terrorism Act 2000

  • The Terrorism Act passed in 2000 was the first form of permanent anti-terrorism legislation introduced to the UK. It works by combatting the global problem of terrorism, and a process called reverse money laundering. This is when terrorists use 'clean' money for criminal causes (opposed to the process of making illegal funds look like they are legitimate). Reverse money laundering is the main way that terrorists fund their plans, something that we can fight against through compliance with AML laws.
  • This Act leaves people more vigilant about their money and the causes it may support.

Criminal Finance Act 2017

  • This gives law enforcement agencies more powers when it comes to general money laundering problems, as well as the recovery of proceeds of a crime, tax evasion and corruption, and combatting the financing of terrorism.
  • The Act makes companies and partnerships criminally liable if they fail to report suspicions. It may apply to a member of the team or an external agent, even where the business was not involved in the criminal act directly.

Anti-Money Laundering Act 2018

  • Before this was passed, the UK's domestic sanction regimes were limited to terrorism. The introduction of this act comes with the changes brought about with Brexit. Our move away from the EU will mean we are left with a gap in AML legislation. England and Wales will soon have the power to impose sanctions independently of the EU.

Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017

  • This Act introduced the provisions of the European Union's Fourth Anti-Money Laundering Directive (4 MLD) into national law, replacing the Money Laundering Regulations and the Transfer of Funds Regulations both 2007.
  • These regulations put a focus on having a risk-based approach to money laundering. A number of internal controls and procedures were brought in to make sure that policies and procedures are in place to deal with laundering risks when they come about. This is highlighted by the need for customer due diligence, record keeping and imposing a number of obligations on senior management and employers.

Anti-Money Laundering Policies

The AML policy explores what businesses can do to prevent becoming victims of launderers. The impact could end a business through damaging their finances, as well as damaging effects on reputation and customer relations.

Appointing a money laundering reporting officer within an organisation is something that businesses in the regulated sector are obliged to do. The importance of preparation, the understanding in being able to spot suspicious threats, and knowing how to deal with them are all areas that the nominated officer must cover. They must report money laundering activity to the National Crime Agency.

Due diligence checks and robust record keeping are also a prominent areas of AML policy because they're the steps you can take each day to reduce the threats of laundering. This could seem like a waste of time for a lot of organisations, but by carrying out constant customer checks and keeping up-to-date records on their data is exactly what launderers don't want. The more vigilant you are in the everyday running of the business, the harder it is for launderers to have success.

The Ever-Changing Laws in Anti-Money Laundering

The property industry shows how AML laws are constantly changing. Frontmen for anonymous foreign firms that invest cash in British property could face up to two years in prison and unlimited fines, as well as being named on the public register so people can know exactly who they are dealing with.

The government announced that they were wanting the plans to help crack down on money laundering as part of its long-awaited response to a consultation on the billions of pounds of high-end UK property owned by overseas companies.

What worries people is that the rules won't be implemented until 2021, despite the evident problem of laundering in the property world. This timing means the laws have already received criticism from the anti-corruption team at Global Witness: "Today's announcement gives the criminal and corrupt another three years to invest their stolen cash in London's property market."

It is estimated that at least £122 billion worth of property in England and Wales is owned through companies based in secretive tax havens, making it pretty much impossible to work out the true ownership. The large sums of money flowing into UK property are thought to distort the market as a result, particularly in London.

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