DIRECTORS’ LIABILITY - 17.01.2007

It’s a dirty job, but someone has to do it

They don’t apply to us

You might think that the money laundering laws don’t apply to you. Wrong! Following the introduction of legislation in 2002 and 2003, anyone who runs a business is at risk of being caught out. But surely it only applies if your business operates in the shadows? Wrong again. The legislation is widely drafted and applies to a multitude of offences where, basically, the effect is to save the company money, e.g. not paying tax, disposing of waste without a licence etc.

Law in action

The Proceeds of Crime Act 2002 (POCA) will catch almost any kind of conduct which results in the proceeds of crime being laundered. There are three main offences; (1) concealing, disguising, converting or removing criminal property; (2) facilitating the acquisition, retention, use or control of criminal property or being concerned in an arrangement that facilitates any of it; (3) acquiring, using or possessing criminal property.

Trap. The reference to “being concerned in an arrangement” is a wide and sweeping concept and could potentially catch your company out if it’s doing no more than being on the fringes of the money laundering activity. The legislation covers all types of business of whatever size, so be wary if offered large sums of cash, and don’t be tempted to take short cuts by not paying for licences etc.

There’s more

As well as having to worry about POCA, if your company happens to be in what’s called “the regulated sector” then you’ll need to get your head around the Money Laundering Regulations 2003 pretty sharp too. This will involve you in a certain amount of red tape as well as cost, but if you don’t comply, expect a large fine and a possible stay at Her Majesty’s Pleasure. If your company does any of the following, then in addition to POCA, you’re regarded as being in the regulated sector; Almost every kind of banking and financial business; bureaux de change; estate agents; casino operators; insolvency practitioners; tax advisors; accountants; lawyers; company formation businesses; dealers in high value goods (transactions involving a cash payment of 15,000 euros or more).

What to do?

In a nutshell, if your company does any of the above, the Regulations require you to “know your client”, keep a record of your clients’ transactions for at least five years, appoint a Money Laundering Reporting Officer (MLRO) and set up an in-house procedure for your employees to disclose their knowledge or suspicion of money laundering to the MLRO and have systems and training in place to prevent and detect money laundering.

Tip. Don’t be like the 50% of directors in the survey, who, although aware of the existence of the Regulations, don’t have a defined and documented process in place for checking identities. If one of your employees failed to spot something fishy because they hadn’t been trained properly, you’d be looking at a fine and/or prison sentence. As a bare minimum and without costing anything, do the following; always know who your client is - ask them to produce ID, e.g. passport, utility bills etc., and insist on payment by cheque.