How Can We Stop Crime By Focusing On The Money Laundering?

Many commentators will argue that without money laundering there would hardly be any crime. The crime industry is certainly massive and therefore the associated management of the proceeds of crime must be equally huge. Different walks of life face different challenges from the problem of crime, not all of which is reported.

There are some crimes that do not involve money. These include "crimes of passion" such as murder or rape. Vandalism and mindless acts of thuggery may have a pecuniary effect on the victims. Often they are caused by poverty. In these such cases however the financial resources within the criminal system are not impacted.

Wrongdoing like this on the other hand is mostly financially motivated in some way. Selling illegal drugs, people trafficking or organised extortion - are all examples of big business that is conducted by organised criminals for huge amounts of money. Money like this forms illegitimate proceeds of crime that is difficult to just spend. Spending the proceeds immediately is not an option as this would provide some easy evidence for the authorities to follow. The solution is to clean the money by the "laundering" process to cover its illegitimate sources. The growth in crime was accompanied by equal growth in the need for cleaning the spoils.

Having cleaned the money, the top crooks were able to afford luxury lifestyles involving big yachts, huge mansions and fast cars. They were able to sit back and smile at the authorities, safe in the knowledge that any scrutiny of their wealth would not show it had been obtained from illegitimate sources.

There have always been methods for prosecution authorities to confiscate profits of offences from convicted criminals. But in an attempt to counter gang leaders that for a long time were thought to be beyond the legal process, powers have been extended in the last decade or so to combat this.

Now, just about anybody seen to have the trappings of wealth can be prosecuted under the Proceeds of Crime Act 2002. Now it is the criminals who must prove where their source of wealth came from. Thus, if a suspected drug baron is asked to show where his wealth has come from, he is faced with a serious problem if he can't show the exact source of his funds. It may be the case that he has moved his funds around so that the illegal source is hidden, but if he then can't show how the funds were earned, gifted or won somehow he will be liable for tax on them as profits, together with interest and penalties that will coincidentally add up to as much as the amount in question!

The new regime has been successful in bringing some otherwise unreachable villains to justice. It has hit them in their pockets, where it hurts. Now the trouble is that the new powers are used too widely on the smaller frauds and tax evasions - large and small. The result is that more often than not the legislation is applied too harshly to those that are simply caught up in its meshes on a technicality. In this case, it adds a further level of importance to the criminal defence framework that must exist to temper the authorities' sometimes overzealous approach.


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Mark Jenner is a forensic accountant specialising in criminal defence. He is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He advises companies on anti money laundering matters, fraud investigation and how best to protect themselves from fraud.