The Proceeds of CrimeAct 2002 outline the three primary money laundering (ML) offences in sections327, 328 and 329 (Legislation.gov.uk, 2018).S.327 identifies theactus 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 orbecome involved in an arrangement which they are aware or suspect facilitate(by any means) the acquisition, retention, use or control of criminal propertyby or on behalf of another person. Under S.329, an offence is committed if aperson acquires, uses, or has possession of criminal property (Taylor, J, 2018).Itis necessary to prove the property was benefited from criminal activity, andthat the offender was aware (section 340 POCA). The prosecution can use circumstantialevidence allowing the jury to infer the offender had necessary knowledge orsuspicion.
Beyond these mainoffences, 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 responsibilityon employees within the regulated sector to report, where they have reasonablegrounds to, what they know or suspect to be ML. S.331 follows that if anominated officer within the regulated sector who received a disclosure basedon S.330 and does not pass the information on to the National CriminalIntelligence Service (NCIS), they have committed an offence.
S.332 creates asimilar offence for nominated officers outside the regulated sector.Lastly, S.333 outlines an offence as doing or saying anything to tip-offan offender under investigation, or even if a report has not yet been made (Mylawyer.co.uk,2018).Though a simpleconcept, the methods employed by offenders of ML are anything but.
Highlycomplex ML usually has three phases (People.exeter.ac.
uk, 2018):Placement- placing criminal money intothe financial system.Layering- obscures the origin by moving money around via complex transactionsoften 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 thesephases, and for professionals to avoid becoming involved in ML, safeguards areto be adopted in the form of money laundering regulations (MLR) (Cps.gov.uk,2018).
MLR 2007 was recently refreshed as MLR 2017 which brought updatedimplementations from the EU’s 4th Directive on Money Laundering into UK law (Icaew.com,2018). Key aspects are outlined below:Whole firm riskassessment (S.18)- Assess the risks faced by the business and clients involvedin ML or terrorist financing. The nature of the assessment will depend largelyon the size and nature of the firm in question, but it is important that theassessment is well documented.Internal controls -officer responsible for compliance (S.21a)- A money laundering complianceprinciple (MLCP) must be appointed to the board of directors or equivalent, anda nominated reporting officer (MLRO), who reports suspicious activity to the NCIS.
Internal controls -screening of relevant employees (S.21b)- Employees with any involvement indetection or prevention of ML must be assessed for competence, conduct, andintegrity. They must receive regular training on how to deal with transactionsor activities relating to ML.Internal controls -independent audit function (S.21c)- Regular ML compliance review headed by MLCPto monitor anti-ML policies and procedures.
Policies, controls andprocedures: (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 businessrelationship and identify anything relevant to internal ML risk assessments.Look out for changing client identity, inconsistent transactions, or changes inclient services.To summarise, checks, procedures andcontrols must be put in place to anticipate and prevent ML.
Staff must betrained to deal with ML procedures and law. An MLCP and MLRO must be appointedand report to NCIS (Ccab.org.uk, 2018). Lastly, client due diligence must beundertaken before any business is conducted (Taylor, J, 2018).
Further than existing regulatory safeguards,implementing and adopting emerging technologies will significantly reduce therisk of ML activities over the next decade (Ey.com, 2018). Blockchainplatforms, an immutable, cryptographically protected, decentralised ledgerallow for all company transactions to be recorded with no fraud.
Artificialintelligence (AI) will carry out data analysis on this transactional data, suchas existing platforms like IBM Watson, to automatically identify any anomaloustrends in client data. AI will further use natural language and sentiment APIsto understand and assist in the implementation of MLR 2017 for businessesacross the UK no matter their size.Globalisationand the increasingly international nature of organisations have brought with itincreased 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 fulfiland supplement a range of investigative functions to identify and mitigatefraud.
Onesuch function is investigative accounting. Activities include the review of allfactual information with professional scepticism, then providing suggestionsfor courses of action. Tracing and back-tracing of misappropriated assets, andcrucially, their recovery (Gov.uk, 2018). Coordinating with other relevant experts,like document examiners or industry specialists.Onceit is clear an investigation could lead to legal proceedings, a litigation holdis communicated to all pertinent departments. From here, forensic accountants canprovide litigation support (Globalinvestigationsreview.
com, 2018). They canassist in the support or rebuttal of a claim; provide a preliminary assessmentof the case by validating evidence and reviewing relevant physical and digitaldocumentation identifying areas of potential damages or loss. They can attendexamination and discovery processes to review the case testimony and formadditional questions for the counsel from their understanding of financialissues. Further, they can act as an expert witness for the case, reviewing andcross-examining the opposing expert’s reports and positions.Toconclude, using external parties, especially when management is potentiallyinvolved in fraud, can prevent low morale from breeding internally, and reduce adversepublic scrutiny.
Negligence is a tortcommitted when a breach of legal duty of care results in damage or loss. Fourelements are examined for negligence to be proven. It has to be establishedwhether the plaintiff was owed a legal duty of care (Donoghuev Stevenson) (HeustonM.A, R, 2018), that the defendant breached that duty by actionor lack of action (Nettleship v Weston) (Bailii.
org, 2018), if thedefendant’s action or inaction is what caused the plaintiff’s damage (Smith vLeech Brain & Co.) (Sixthformlaw.info, 2018), and that the plaintiff wasinjured or harmed (The Wagon Mound (No. 2)) (Bailii.org, 2018).The Health and Safety atWork 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 sportscentre owed a statutory duty of care to Karim.Reasonably practicable isdefined as balancing the level of risk against the measures required to controlthe risk, it should not be disproportionate in terms of time, money or effortrequired (Healthandsafetyatwork.com, 2018). Ensuring that water stops leakingfrom the pipes onto the indoor football pitch, or placing a method to preventwater pooling, as well as pre-emptively warning players due to enter the pitchdoes not exceed what is reasonably practicable. In fact, had the sports centrenot been able to contain the leak, the indoor football pitch should have beenclosed off for activities. This is due to the sports centre’s requirement underlaw to ensure the playing surface is in good repair, and free from slip andtrip hazards (Hse.
gov.uk, 2018).Therefore, it is clear thatthe sports centre owed a legal duty of care to Karim, their inaction breachedthat legal duty of care, resulting in Karim becoming injured, and that it wasthe sports centre’s inaction that caused Karim’s injury. Karim can successfullypursue a negligence claim.The sports centre has notundertaken work in the way required to under the Health and Safety at Work Act1974, breaking their statutory duty towards Karim and resulting in thepossibility of a negligence claim, for which Karim must follow the proceduresoutlined in the Civil Procedure Rules 1998 (Justice.gov.
uk, 2018). In thiscase, a forensic accountant will become involved primarily to ascertain thecost of damages or economic loss incurred as a result of Karim’s injury. Forensicaccountants are adept at integrating accounting and auditing skills withinvestigative skills and horizontal thinking to give thorough and independentassessments (Towergateinsurance.co.uk, 2018).
Additionally, their observationsand analysis will be of a standard suitable to present in a court of law, andif required, a forensic accountant familiar with the area in question can actas an expert witness to add validity to the claim for Karim.Three types of loss mayarise for Karim, loss of earnings, profit, or pension (Frenkels.com, 2018). Aforensic accountant will be able to carry out detailed investigations into theassessment for Karim’s loss of earnings whether he is self-employed, oremployed.
If he is a self-employed or the owner of a business, they can assessthe loss of profit by taking into consideration various factors, such astrading history, growth trends, or impacts caused on income or expense streams.Lastly, the loss of pension can be highly complicated, especially if Karim iscontributing towards both a state and private pension. However, through similarfinancial and investigative analysis, a final cost of damages towards Karim asa result of the personal injury can be determined.Beyond this, a forensicaccountant acting as an expert witness can start to build an understandingthrough investigations as to why the correct actions were not undertaken by thesports centre. For example, improper documentation and training of staff thatperhaps should not have let Karim and others play on the hazardous pitch.