White Collar Crime

Introduction

For years, money laundering remains to be a severe economic and legal issue in the United Kingdom and across the globe. Money laundering is considered as a process whereby lawbreakers attempt to cover and differentiate their actual source and possession of funds from criminal operations thus avoiding prosecution, sentence, and benefits from illegal cash. Money laundering is accomplished following several stages such as placement, layering as well as integration. During the initial stage, the dirty money is usually put into the financial system for cleaning. This criminal activity usually cost the economy and society millions, and thus all those involved must be held accountable for their involvement. Based on the connection of money laundering and international terrorism, lawmakers are highly focused on putting in place rather strict measures to deter involvement of parties such as financial institutions which are highly involved in cleaning the money. In the effort to reduce and deter the potential of money laundering lawmakers have over the years come up with regulatory measures for financial institutions as a way of eradicating such organized crimes. Banking institutions are therefore required to offer training to their staffs with regard to identifying any activities of laundering by recognizing the transactions that amount to such crimes such as terrorist financing[1]. Thus, if the institutions fail to adhere to the regulations, then they are held accountable for the proceeding crimes. However, the law in the UK has made life very challenging for financing institutions particularly banks which is prompted mainly by the UK’s money laundering regulations. The law has made significant modifications in the manner in which banks deal with clients and their saving accounts. This report offers a detailed analysis to illustrate how the obligations imposed by the UK’s money laundering provisions adversely impact the relationship of financial institutions with their customers.

Based on the Money laundering Regulations of 2007, in the United Kingdom banks as well as other financial institutions are required to ensure that they do not facilitate criminal offenses as indicated by POCA (2002) as well as under counter-terrorism legislation. Also, they are a subject to some critical responsibilities of operating their enterprises in full compliance with the money laundering provisions[2]. Hence the regulations normally usually have some direct impacts on banks with reference to money laundering as well as terrorist financing. In this case, the institutions are required to implement systems and procedures for lowering the potential for such criminals and thus play a part in assisting authorities in noticing money laundering and financing of terrorist activities that are likely to harm the economy and threaten societal wellness and security. The unique characteristic of the regulations is that the institutions should embrace risk sensitive methodologies that contain enforcement procedures that regulate the occurrence of crime. It is worth noting that the regulations require the assessment of the client to determine the value of their businesses and the intended motives of their finances. This helps in determining any suspicious activities that would entail money laundering or any illegal financing[3]. The approach must be applied before acting on the respective client following risk-sensitive approaches all which seek to deter money laundering. However, in most cases, the institutions frequently experience extreme challenges while trying to create a balance amid their obligations to clients and the law since the demands from each party differs.

Financial institutions have the obligation of detecting laundering activities since they are involved in the placement stage of the crime which is prime in further proceedings. It is not just that during the phase, it is quite easy to detect the offense, but during this level, the activities are closely associated to a crime which would result in the apprehension of perpetrators of the offense as well as confiscation of the activities. Since the responsibility that is imposed to the financial institutions by the regulations are supported by the criminal sanction which means that criminal punishments can be subjected to any bank that fails to comply makes it even more challenging even for the honest institutions[4]. It is worth noting that with the diversity of society today and with more people getting involved in international businesses, it becomes somewhat challenging to detect such crimes. Most of the banks operate in an honest manner where they tend to prioritize on the needs of their clients which mainly involves confidentiality protection but find themselves in a dilemma as the law demands more from them which makes their relationship with the clients unfocused leading to negative implications on their businesses. Most clients tend to participate less in placing their funds in the institutions for fear of their privacy being breached by the very institutions that should be protecting them.

The Money Laundering Regulations has made the life of banks very challenging as it has made some notable changes with regard to how they deal with clients and their respective accounts[5]. One of the challenges that the institutions experience is related to the conflict amid their duty to provide their customers with confidentiality as well as the responsibility to ensure that they detect and report any doubt as related to money laundering or illegal financing of terror groups across the globe as indicated by the legislation. In general, this is the primary issue as related to the law as banks seek to apply their obligations, but there is more. In the case that an institution gains doubts that some criminal activities are ongoing following a customer’s account, then it experiences intense challenges while trying to respond to the issue[6]. If nothing is done and thus the client is permitted to gain access to the money, then this exposes it’s to a criminal liability particularly by participating in offense arrangement. Besides, if the banks freezers the account to ensure that the client does not access their account, this is an infringement of their contract since consent has not been obtained. If the suspicions are not reported to SOCA, then it has committed an offense. However, if it acts by reporting it is likely to become a subject of breaching the trust of the customer

The fact that the obligations imposed by the money laundering provisions in the UK negatively affects the relationship between banks and their client is widely proven by the case of Per Laddie J [at 62] in Bank of Scotland v A Ltd v The Serious Fraud Office Interested Party [2001] C.P. Rep. 14[7]. In this case, the banking institutions were seeking for clarification from the court on the information that it should provide in ongoing defence proceeding against it. In the instance that one of its customers was being suspected of engaging in money laundering operations noting that disclosure is likely to make the institution liable for violating its obligation to the customer as noted by the Criminal Justice Act of 1988[8]. The ruling of the case was that the bank was in a real dilemma of the actual thing that it is supposed to do, but in the case, SFO was the best defendant rather than the customer. This, therefore, shows that banks are subjected to the trauma of having to adhere to the law while in turn damaging their relationship with clients in general. As part of their obligations, they are expected to protect their customers while at the same time assisting the legal authorities in countering crime which creates conflict. The dominance of such dilemmas has resulted in the rise of litigation as illustrated above, but the institutions have acquired limited guidance. Besides in the case of C v. S, the institution acquired a court order that demanded information disclosure amid the client and the person accused of fraud[9]. Having made a report, it was afraid of being exposed to the threat of tipping an offense thus exposing the client, and the court held that the bank should negotiate on the information to be offered to create an agreeable solution that does not affect their relationship with their customer.

Conclusion

To sum up, based on the analysis above it is clear that the ability to create a balance amid legal and customer obligation under the money laundering provisions is quite challenging. The requirements lead to the conflicting interest that results in banks seeking clarification from the court. Even though banks are expected to make their reports when their suspicions are confirmed they are unable to determine the actual information that they are required to disclose without harming the confidentiality of their customers. Thus, there is a need to modify the measures to enable the institutions to strike a balance amid the obligations while seeking to deter crime in the UK.

 

 

 

References

Alldridge, Peter. "Money laundering and globalization." Journal of law and society 35, no. 4 (2008): 437-463.

Ellinger, E P, Eva Z. Lomnicka, C Hare, and E P. Ellinger. Ellinger's Modern Banking Law. Oxford: Oxford University Press, 2009. Print.

Lea, John. "Hitting criminals where it hurts: organised crime and the erosion of due process." Cambrian L. Rev. 35 (2004): 81.

Levi, Michael. "Money laundering and its regulation." The Annals of the American Academy of Political and Social Science 582, no. 1 (2002): 181-194.

Per Laddie J [at 62] in Bank of Scotland v A Ltd v The Serious Fraud Office Interested Party [2001] C.P. Rep. 14.

 

 

 

 

[1] Levi, Michael. Money laundering and its regulation (The Annals of the American Academy of Political and Social Pp.181-194)

[2]Lea, John Hitting criminals where it hurts: organised crime and the erosion of due process (Cambrian L. Rev 2004 81)

[3] Ellinger, Eva Lomnicka, Hare, and Ellinger. Ellinger's Modern Banking Law (Oxford: Oxford University Press, 2009)

[4] Levi, Michael. Money laundering and its regulation (The Annals of the American Academy of Political and Social Pp.181-194)

[5] Alldridge, Peter Money laundering and globalization (Journal of law and society Pp. 437-463)

[6] Lea, John Hitting criminals where it hurts: organised crime and the erosion of due process (Cambrian L. Rev 2004 81)

[7] Per Laddie J [at 62] in Bank of Scotland v A Ltd v The Serious Fraud Office Interested Party [2001] C.P. Rep. 14.

[8] Ellinger, Eva Lomnicka, Hare, and Ellinger. Ellinger's Modern Banking Law (Oxford: Oxford University Press, 2009)

[9] Ellinger, Eva Lomnicka, Hare, and Ellinger. Ellinger's Modern Banking Law (Oxford: Oxford University Press, 2009)