Compliance Knowledge Base | Anti-Money Laundering (AML) Training
The 'regulated sector' refers to firms that are obligated to implement systems of work to detect and prevent money laundering activity. They are part of the financial services community and are regulated by the Financial Services Authority (FSA). Examples of organisations in this sector include banks, insurance companies, lawyers, and accountants.
Being part of the regulated sector means that these organisations are seen as more vulnerable to money-laundering due to the large sums of money constantly being moved in and around them. Because of this, there exists a range of anti-money laundering measures that the organisations must follow and adhere to in order to reduce the chances of money laundering occurring.
The regulated sector is defined within the Proceeds of Crime Act 2002. This is an Act from parliament that contains the principal money laundering legislation for the UK. They define the regulated sector as:
- Banks and credit institutions
- Stock brokers and investment firms
- Insurance companies and insurance intermediaries
- Auditors, accounts, book-keepers, tax advisers
- Property dealers and estate agents
- Trust or company formation and management
- Legal services
- Trading in goods for cash of at least £13,000
- Casinos
- Auction platforms
How the Sector Affects People
As you can see, the sector impacts us all in one way or another; after all, we all use financial institutions and other regulated sector organisations in our day to day lives. This means that their need to follow anti-money laundering legislation and best practice is something that cannot be stressed enough. Since money laundering can involve dangerous or violent criminal activity, no organisation should be ignoring its occurrence.
This level of impact is highlighted in a recent case from October 2017 involving a businesswoman and lawyer. The two women were able to gain $3.7 million (roughly £2.8 million) in crime proceeds. They worked by posing as a business wanting to work with law firms, creating fake real estate transactions, and setting up fake online dating sites. Their shared expertise meant that they were able to defraud dozens of victims out of money, launder the funds overseas, and make millions as a result.
The technique of moving the money between different accounts all over the world meant that they were able to launder it successfully, building up more and more income as they went. The funds were sent overseas because they could then take advantage of the relaxed banking rules, allowing them to avoid suspicion through depositing money anonymously.
This example displays how criminals use organisations within the regulated sector to their advantage (in this case, because they worked within it). Having a bank employee on side meant that fake accounts and cashier cheques were easy to set up. As well as this, the participation of a lawyer allowed them to understand how law firms work and what checks would be done for anti-money laundering.
By following the money, the FBI were eventually able to trace the funds from beginning to end, exposing that the perpetrators were living lavish lifestyles with flashy cars, houses, and lots of expensive holidays. The result was healthy compensation for all of the victims affected, and hefty prison sentences for the criminals involved.