The Proceeds of Crime
Act 2002 outline the three primary money laundering (ML) offences in sections
327, 328 and 329 (Legislation.gov.uk, 2018).
S.327 identifies the
actus reus of the offence as concealing, disguising, converting, transferring,
or removing criminal property from England and Wales or Scotland or Northern Ireland.
S.328 is a broad offence, whereby a person commits an offence if they enter or
become involved in an arrangement which they are aware or suspect facilitate
(by any means) the acquisition, retention, use or control of criminal property
by or on behalf of another person. Under S.329, an offence is committed if a
person acquires, uses, or has possession of criminal property (Taylor, J, 2018).
is necessary to prove the property was benefited from criminal activity, and
that the offender was aware (section 340 POCA). The prosecution can use circumstantial
evidence allowing the jury to infer the offender had necessary knowledge or
Beyond these main
offences, S.330, S.331, and S.332 relate to a failure to disclose offences,
itself resulting in an offence (Cps.gov.uk, 2018). S.330 sets a responsibility
on employees within the regulated sector to report, where they have reasonable
grounds to, what they know or suspect to be ML. S.331 follows that if a
nominated officer within the regulated sector who received a disclosure based
on S.330 and does not pass the information on to the National Criminal
Intelligence Service (NCIS), they have committed an offence. S.332 creates a
similar offence for nominated officers outside the regulated sector.
Lastly, S.333 outlines an offence as doing or saying anything to tip-off
an offender under investigation, or even if a report has not yet been made (Mylawyer.co.uk,
Though a simple
concept, the methods employed by offenders of ML are anything but. Highly
complex ML usually has three phases (People.exeter.ac.uk, 2018):
Placement- placing criminal money into
the financial system.
Layering- obscures the origin by moving money around via complex transactions
often using companies or trusts in different jurisdictions globally.
Integration- making criminal money reappear as legitimate funds or investments,
often through legitimate investments, eg. real estate.
In order to combat these
phases, and for professionals to avoid becoming involved in ML, safeguards are
to be adopted in the form of money laundering regulations (MLR) (Cps.gov.uk,
2018). MLR 2007 was recently refreshed as MLR 2017 which brought updated
implementations from the EU’s 4th Directive on Money Laundering into UK law (Icaew.com,
2018). Key aspects are outlined below:
Whole firm risk
assessment (S.18)- Assess the risks faced by the business and clients involved
in ML or terrorist financing. The nature of the assessment will depend largely
on the size and nature of the firm in question, but it is important that the
assessment is well documented.
Internal controls –
officer responsible for compliance (S.21a)- A money laundering compliance
principle (MLCP) must be appointed to the board of directors or equivalent, and
a nominated reporting officer (MLRO), who reports suspicious activity to the NCIS.
Internal controls –
screening of relevant employees (S.21b)- Employees with any involvement in
detection or prevention of ML must be assessed for competence, conduct, and
integrity. They must receive regular training on how to deal with transactions
or activities relating to ML.
Internal controls –
independent audit function (S.21c)- Regular ML compliance review headed by MLCP
to monitor anti-ML policies and procedures.
Policies, controls and
procedures: (S.19 and S.20)- Written documentation of anti-ML policies,
controls, and procedures must be maintained and approved by senior management.
Client due diligence-
Requirement to carry out due diligence prior to creating a business
relationship and identify anything relevant to internal ML risk assessments.
Look out for changing client identity, inconsistent transactions, or changes in
To summarise, checks, procedures and
controls must be put in place to anticipate and prevent ML. Staff must be
trained to deal with ML procedures and law. An MLCP and MLRO must be appointed
and report to NCIS (Ccab.org.uk, 2018). Lastly, client due diligence must be
undertaken before any business is conducted (Taylor, J, 2018).
Further than existing regulatory safeguards,
implementing and adopting emerging technologies will significantly reduce the
risk of ML activities over the next decade (Ey.com, 2018). Blockchain
platforms, an immutable, cryptographically protected, decentralised ledger
allow for all company transactions to be recorded with no fraud. Artificial
intelligence (AI) will carry out data analysis on this transactional data, such
as existing platforms like IBM Watson, to automatically identify any anomalous
trends in client data. AI will further use natural language and sentiment APIs
to understand and assist in the implementation of MLR 2017 for businesses
across the UK no matter their size.
and the increasingly international nature of organisations have brought with it
increased scrutiny and regulatory investigations into fraud (Bdo.co.uk, 2018),
arguably fueled by scarring scandals like Enron or WorldCom (Medium.com, 2018).
Thus, organisations and their legal counsels use forensic accountants to fulfil
and supplement a range of investigative functions to identify and mitigate
such function is investigative accounting. Activities include the review of all
factual information with professional scepticism, then providing suggestions
for courses of action. Tracing and back-tracing of misappropriated assets, and
crucially, their recovery (Gov.uk, 2018). Coordinating with other relevant experts,
like document examiners or industry specialists.
it is clear an investigation could lead to legal proceedings, a litigation hold
is communicated to all pertinent departments. From here, forensic accountants can
provide litigation support (Globalinvestigationsreview.com, 2018). They can
assist in the support or rebuttal of a claim; provide a preliminary assessment
of the case by validating evidence and reviewing relevant physical and digital
documentation identifying areas of potential damages or loss. They can attend
examination and discovery processes to review the case testimony and form
additional questions for the counsel from their understanding of financial
issues. Further, they can act as an expert witness for the case, reviewing and
cross-examining the opposing expert’s reports and positions.
conclude, using external parties, especially when management is potentially
involved in fraud, can prevent low morale from breeding internally, and reduce adverse
Negligence is a tort
committed when a breach of legal duty of care results in damage or loss. Four
elements are examined for negligence to be proven. It has to be established
whether the plaintiff was owed a legal duty of care (Donoghue
v Stevenson) (HeustonM.A, R, 2018), that the defendant breached that duty by action
or lack of action (Nettleship v Weston) (Bailii.org, 2018), if the
defendant’s action or inaction is what caused the plaintiff’s damage (Smith v
Leech Brain & Co.) (Sixthformlaw.info, 2018), and that the plaintiff was
injured or harmed (The Wagon Mound (No. 2)) (Bailii.org, 2018).
The Health and Safety at
Work Act 1974 applies to the sports centre and its employees as per government regulations
(Hse.gov.uk, 2018), requiring them to carry out what is reasonably practicable
(Sections 2&3) to ensure people’s health and safety. Thus, the sports
centre owed a statutory duty of care to Karim.
Reasonably practicable is
defined as balancing the level of risk against the measures required to control
the risk, it should not be disproportionate in terms of time, money or effort
required (Healthandsafetyatwork.com, 2018). Ensuring that water stops leaking
from the pipes onto the indoor football pitch, or placing a method to prevent
water pooling, as well as pre-emptively warning players due to enter the pitch
does not exceed what is reasonably practicable. In fact, had the sports centre
not been able to contain the leak, the indoor football pitch should have been
closed off for activities. This is due to the sports centre’s requirement under
law to ensure the playing surface is in good repair, and free from slip and
trip hazards (Hse.gov.uk, 2018).
Therefore, it is clear that
the sports centre owed a legal duty of care to Karim, their inaction breached
that legal duty of care, resulting in Karim becoming injured, and that it was
the sports centre’s inaction that caused Karim’s injury. Karim can successfully
pursue a negligence claim.
The sports centre has not
undertaken work in the way required to under the Health and Safety at Work Act
1974, breaking their statutory duty towards Karim and resulting in the
possibility of a negligence claim, for which Karim must follow the procedures
outlined in the Civil Procedure Rules 1998 (Justice.gov.uk, 2018). In this
case, a forensic accountant will become involved primarily to ascertain the
cost of damages or economic loss incurred as a result of Karim’s injury. Forensic
accountants are adept at integrating accounting and auditing skills with
investigative skills and horizontal thinking to give thorough and independent
assessments (Towergateinsurance.co.uk, 2018). Additionally, their observations
and analysis will be of a standard suitable to present in a court of law, and
if required, a forensic accountant familiar with the area in question can act
as an expert witness to add validity to the claim for Karim.
Three types of loss may
arise for Karim, loss of earnings, profit, or pension (Frenkels.com, 2018). A
forensic accountant will be able to carry out detailed investigations into the
assessment for Karim’s loss of earnings whether he is self-employed, or
employed. If he is a self-employed or the owner of a business, they can assess
the loss of profit by taking into consideration various factors, such as
trading history, growth trends, or impacts caused on income or expense streams.
Lastly, the loss of pension can be highly complicated, especially if Karim is
contributing towards both a state and private pension. However, through similar
financial and investigative analysis, a final cost of damages towards Karim as
a result of the personal injury can be determined.
Beyond this, a forensic
accountant acting as an expert witness can start to build an understanding
through investigations as to why the correct actions were not undertaken by the
sports centre. For example, improper documentation and training of staff that
perhaps should not have let Karim and others play on the hazardous pitch.