John Binns, partner at BCL Solicitors LLP and specialist in financial crime and money laundering, provides an interesting insight into money laundering during the COVID-19 pandemic
Money laundering will not be at the top of many people’s lists of things to worry about as a result of the coronavirus pandemic. For those of us whose job it is to worry about money laundering generally, however, that job has just got harder.
Part of the challenge, as for any business during a period of lockdown, is practical – making sure that front-line staff are able to continue to discharge their Anti-Money Laundering (AML) responsibilities even while working remotely, with the use of workarounds where necessary. Video calls and screenshots of passports and utility bills, for instance, will now have to do a lot of the work that used to be done by face-to-face meetings and certified copies.
We must also be alert to the sudden advent of new typologies of fraud, and opportunities for money laundering and sanctions evasion, as a result of the crisis. Organized criminals are exploiting the fears of consumers, some of whom are having to use online systems for the first time. Business owners and managers facing financial pressures may be tempted to cut corners, and government bailout schemes may also be open to abuse.
The new crimes of running non-compliant businesses, and dealing with their proceeds
On top of that, many business activities that were hitherto vital and routine have essentially just been rendered criminal, virtually overnight. In the UK, any customer who runs a restaurant, café, bar or pub, and who continues to sell food or drink on their premises, who continues to run a business of another listed type, including most non-remote retail, is committing an offence under emergency regulations. That, of course, means that anything they do with any proceeds they receive from running such a business will amount to money laundering.
What does that mean for businesses in the regulated sector who have obligations to detect and report money laundering? We are in unfamiliar territory of course, but the obligation to risk-assess both new and existing customers must surely now include an obligation to consider the prospect that may be committing one or more of these new regulatory offences. It may be acceptable to take for granted that most or all of them are not, but it would be a mistake to ignore that new type of risk altogether
Businesses that make their employees come into work: Should we report them?
This new type of risk is even harder when we consider the restrictions on movement in those same regulations, which literally criminalise leaving one’s home without a ‘reasonable excuse’. The regulations provide examples, the most relevant of which in a business context is for the purposes of work, ‘where it is not reasonably possible’ to work from home.
What does that mean for businesses that, perhaps prioritising their bottom line over the safety of their workers or compliance with the new regulations, or perhaps in ignorance of the detail of them, continue to require their workers to come into work regardless? The answer is that they too would be committing an offence and that handling the proceeds of that business would also amount to money laundering.
Requiring regulated-sector businesses to check that their customers are letting their employees work from home where they can would, surely, be a step too far. But the problem is not entirely academic where there is regular online reporting about businesses that are arguably breaching this law, particularly where there are grey areas involved and the standard at which reporting is required – reasonable grounds to suspect – is so notoriously low.
What about businesses overseas?
AML professionals with a keen interest in such things will know as well that laundering the proceeds of conduct overseas is also usually an offence under UK law, where the conduct is lawful there but would be unlawful here (popular examples including Spanish bullfighting and Canadian cannabis sales). Fortunately, the fine print of some obscure 2005 legislation means that the new offences – because they are punishable only with fines – are not in this category, so there will be no need to report equivalent conduct abroad.
A call for common sense
Is it really fair to expect AML professionals, and their colleagues on the front line of the regulated sector, to worry about these things? The question is surely whether, if the authorities did start to receive a plethora of reports from banks and others, to the effect that their customers might be breaching regulations, that would result in useful enforcement action, which in turn would help save lives and protect our health services.
The answer to that is not abundantly clear, but it is surely necessary now to make it so. If it is to be part of our new way of living and working that businesses must check and report on each other’s compliance with these strict new rules, then we should at least know where we stand, and see the fruits of it: bluntly, we cannot reasonably in this context see reports disappear into a deep hole, left largely unread.
Alternatively, if that is not realistically part of the government’s plan, perhaps an opportunity could be taken here to relax the requirements just a little, while business as a whole and the regulated sector in particular deals with manifold other problems. Why not, for instance, say that dealing with the proceeds of non-imprisonable offences does not (at least for now) amount to money laundering, or at least, that it need not be reported? That would be in line with international standards, and the laws of many other countries, which have not taken the same hard-line as the UK (often called the ‘all-crimes approach’). In the context of a world struggling to adapt to new rules in all sorts of ways, it would frankly also represent a very welcome dose of common sense.