Big trouble with dirty money

Criminal cash isn't just exotic - it's in every high street. Profession als must take care not to help with its laundering, says Roger Trapp

The arrest last week of two partners in the City office of an international firm of solicitors focuses attention on the far-reaching influence of money- laundering and the legislation designed to combat it.

The two lawyers, along with the Russian wife of one of them, were taken to a west London police station after the money-laundering investigation team of the South-East Regional Crime Squad raided their homes and the Holborn offices of their firm, Faegre & Benson, as part of an inquiry into an alleged plot to launder pounds 32m of Russian mafia cash.

All three were released on bail and charges are not imminent, say police. But Nigel Morris-Cotterill, an associate with the City solicitors Millett Hall, says the episode should help to shatter the complacent attitude shown by lawyers to the risk of prosecution under money-laundering legislation.

Mr Morris-Cotterill says many lawyers appear to think that the legislation that came into effect in April 1994 does not affect them. Or, even if it does, they believe they will either not be caught for failure to comply with the requirement to report suspicious transactions or will not be a target for launderers.

"This is at best naive and at worst dangerous," he says. It is widely recognised that smaller professional practices - in law, accountancy and financial services - are increasingly likely to become a focus for money- launderers as the traditional methods of passing the proceeds of crime into the legitimate economy become more tricky. In particular, financial institutions have become more circumspect about cash transactions and report many that only a few months earlier would have gone through unchallenged.

Nevertheless, the growth of money-laundering is causing such widespread concern that Albert Pacey, director-general of the National Criminal Intelligence Service (NCIS), this week called for a special task force to tackle it. He urged changes in the law to allow the Inland Revenue and police to exchange information about suspects.

Part of the reason why professional firms seem reluctant to address the issue, says Mr Morris-Cotterill, is that everybody associates money-laundering with drug-dealing or international terrorism and often with "sunny places". In reality, a large proportion of the $150bn in dirty money circulating the globe comes from much less exotic sources - the proceeds of everyday crime. "Money-laundering in the UK is not subject to any de minimis rule; it happens daily in every high street," he says.

Another reason for the relaxed attitude on the part of some lawyers is that events designed to raise consciousness - such as the Financial Crime Conference scheduled for London's Cafe Royal on 6 and 7 June - are primarily aimed at banks and other financial institutions. Next month's conference will also see the publication of a book, The Regulation and Prevention of Economic Crime Internationally, that features contributions from Rowan Bosworth-Davies, a consultant at the City law firm Titmuss Sainer Dechert, and other speakers at the event.

One organisation not inclined towards complacency is Travelex, which has grown from modest beginnings in the Seventies to become the world's largest operator of bureaux de change at airports and seaports. While the law introduced a year ago requires transactions of more than pounds 10,000 to be treated as suspicious, the company opts for the much lower figure of pounds 3,000 and has adopted strict vetting and reporting procedures that can alert the NCIS, which was formed to lead Britain's response to the international problem. Moreover, the company refuses to deal with transactions involving more than pounds 50,000 unless it knows the person concerned.

Darren Clayton, company secretary of the group, acknowledges that this approach is not without its drawbacks. "We probably turn away hundreds of thousands of pounds of business worldwide, because people have to go through procedures and that puts them off," he says.

Although the company does not have a stereotypical money-launderer in mind, Mr Clayton says it is usually the combination of the type of transaction and the demeanour of the individual that raises suspicions. Then there are matters of common sense, such as looking askance at people making a transaction in US dollars in an airport terminal that does not serve the United States.

The key, suggests Mr Clayton, is to ensure that staff are aware of the sorts of things launderers are up to. To prevent the NCIS being inundated with reports of suspicious transactions, Mr Clayton clears his company's reports first. But even so, it makes 16 to 18 reports a year in Britain, accounting for about a third of reported transactions. Worldwide, the Travelex figure is about double that.

As Mr Clayton acknowledges, the impetus for Travelex is particularly acute since, by the very nature of its business, it does not know its customers. For a high-street bank, however, the issue is more one of ensuring it keeps accurate and detailed records of transactions.

Perhaps the greatest problem in stamping out money-laundering is the lack of any consistent approach worldwide. Mr Clayton says that comparatively recent entrants to the world economy, such as South Africa and the countries of the former Soviet Union, can be particularly difficult areas. Indeed, the Faegre & Benson raid stems from suspicions that Russian criminal gangs are using respectable London financial institutions, including a high-street bank, to clean up their cash.

The more traditional objects of frustration are the offshore banking centres. On certain Caribbean islands, less restrictive controls and rigid adherence to the concept of banking secrecy are blamed for impeding the apprehension of wrong-doers.

Such attitudes are responsible for the escalating row between Britain and the government of Gibraltar. With Spain apparently claiming that the Rock is being used as a money-laundering centre, the Foreign Secretary, Douglas Hurd, is exerting heavy pressure on local ministers to tighten up regulation of its financial services industry in line with European Union directives.

Chief minister Joe Bossano is resisting this, saying it would place an intolerable burden on the industry and pointing out that Gibraltar has already adopted an EU directive specifically aimed at the laundering of drugs cash. Moreover, he claims that he does not believe laundering is a serious problem in Gibraltar, for the very reason that the centre is so small that it would be easy to detect suspicious transactions. "The bigger the finance sector, the easier it is to escape detection," he said last week.

This point has not been lost on the US authorities, which consistently suggest that it is not only emerging nations and offshore centres that lag behind in this area. For instance, in The Business, a BBC2 programme to be screened tomorrow evening,John Moscow, assistant district attorney for New York, is quoted as saying: "London is a better place for bad guys to do business than New York."

The programme, presented by Jeffrey Robinson, author of The Laundrymen, investigates claims that differences in the regulations between the US and Britain are contributing to London becoming the money-laundering capital of the world.

It claims the different application of the regulations can lead to anomalies, such as a person not being able to open a building society account with pounds 600 of legitimate wages, while another can buy a car for pounds 20,000 in cash and have it customised for a further pounds 10,000, with proceeds from a robbery at the Bank of England's bank-note disposal department.

Not that the US is without its oddities. According to the programme, defence lawyers do not report large cash transactions on the grounds that this might prejudice their clients' cases. An attorney who was paid $103,000 in notes stuffed inside a biscuit tin reported the cash but refused to give the client's name on the grounds that if the client were identified, "we could end up being potential witnesses against our client".

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Travel
travel
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star