National Law Enforcement Agencies & Their Strategies to Tackle Money Laundering in the UK

5 mn read

In general, State is directly responsible for the safety of the general public, which includes enforcing rules & laws, and precluding, detecting, sleuthing and inquiring about unlawful actions. These functions come under the governance of civil authorities, who made the policies with the coordination of departments known as National Law Enforcement Agencies (NLEA). These special functions are also known as policing. Therefore, police is also recognized entrusted with different regulatory authorities and activities. NLEA is a combination of various agencies in the United Kingdom (UK) that could be grouped into three major departments.

1. Territorial Police Forces
2. National Law Enforcement Bodies
3. Miscellaneous Police Forces

The mainstream of law enforcement in the UK is carried out under the territorial police forces. However, Anti Money Laundering (AML) comes under national law enforcement bodies, and other types of interventions carry special operations and secret matters.

Money laundering (ML) has become a critical issue nowadays as it is a criminal procedure of making money generated by felonious activities. According to the UK’s Economic Crime Plan 2019-2022, ML is a process whereby a criminal; hold, camouflage, and hide their criminal activities to elevate and consolidate funds for financing terror^[1]. The evidence from the United Kingdom (UK) was found suspicious in 1995 when 16000 transactions were made unlawfully, in which one percent of transactions were not found in the record, and it had a significant impact on the case report^[2]. Based on the small portion of the percentage, police were involved in the surveillance operation on a target offender. The rudimentary objective of law & enforcement is to restrain the criminal^[3]. To attain this basic objective, national law & enforcement agencies need three things (i) locating information (ii) assembling evidence (iii) retrieving criminals. Therefore, the United Kingdom has established the National Crime Agency (NCA) to deal with the money laundering issues according to the proceeds of Act 2002 (POCA). That NCA apportioned in tax dodging, theft, fraud, corruption, rustling, modern slavery, human smuggling, drug trafficking, and illegal arms sales^[4].

Why is it still a big problem for the UK?

The United Kingdom is an international market known as the International Financial Centre, which processes trillions of pounds on an annual basis. By increasing global business with China and the US, these transactions are predicted more in the near future. For the sake of economic stability, the enforcement agencies of the United Kingdom are worried about tackling money laundering issues. Financial institutions and individuals are engaged in laundering illicit funds and looting economic growth, which may cause financial distress for the states and civil government. To cope with this laundering, the UK had worked on its policies and had made numerous agencies deal with this issue by amending the policies and regulations for the state’s economic safety.

UK Policies to Prevent the Money Laundering

POCA 2002

The United Kingdom (UK) declared policies to prevent money laundering by ML regulations 2002 (POCA) and includes;

• Money laundering (ML) crimes (section 327-329)
• Reporting crimes & regulated segment (section 330 – 332)

Regulations 2017 MLR

Regulation 2017 was amended by ML (money laundering) act 2002 and FT (financing terrorist) act 2000, fraud act 2006, and transmission of supplies/money (Payer’s information/evidence).

Regulations 2019 MLR

Subsequent, regulation 2017 was revised by the ML (money laundering) and FT (financing terrorist amendment) procedures 2019, and it is applicable to all individuals and businesses with effect from 10 Jan 2020. MLR 2019 have the fifth directive against ML (money-laundering) activities^[5].

Anti-Money Laundering (AML) Strategies

• MLR 2017 have several policies to overwhelmed the money-laundering issues on imposing financial institutions and other business;

1. Carry out a suitable level of risk assessment
2. Implement satisfactory states strategies
3. Controls and measures
4. Customer due diligence (CDD)
5. Compliance in Senior management arrangements
6. A financial action task force (FATF)

• Regulation 2017 needs controlling bodies to effectively monitor AML and self-imposed supervisory administrations to confirm their members comply with the MLR 2017.

1. Solicitors Regulations Authority (SRA)

• Three different statutory AML bodies (HMRC, FCA, and OPBAS) ensure compliance to meet the criteria of MLR 2017.
• UK enforcement authorities must comply with the Two limb test, known as the Full-Code Test (FCT). Principally, the said test is exhaustive in the code for Crown-Prosecutors.
• Initially, the state of UK designated the National Crime Agency (NCA) and later on, for more betterment, they involved further agencies in it;

1. Financial Intelligence Unit (FIU)
2. National Economic Crime Center (NECC)
3. Joint Money Laundering Intelligence Taskforce (JMLIT)

• Penalties for catastrophe to fulfil the Anti-Money Laundering (AML), and include failure to;

1. Unlimited fine
2. Carry out risk valuation
3. Apply rules and procedure
4. Retain/maintain the original record
5. Apply customer due diligence measures

• Upsurge the international approach of law and execution agencies (LEA), & also make it possible to provide the required information for the data gathering approach.
• Every benchmark transaction should be verified by the central agencies for financing terrorism.

What has the UK done so far?

The United Kingdom was the founder of FATF (Financial Action Taskforce) in 1989 and has set its goals to contest the ML (money-laundering) and terrorism financing activities. Since 2010 FATF has made amendments in laundering policies, and later on in 2011, the terrorism financing contest was refereed after 9/11. Finally, in 2013 the United States of Kingdom founded the NCA (National Crime Agency) to lead all the supportive departments to prevent crime. In 2014, “Organized Crime Financial Sector Forum” (OCFSF) was built up to smoothen the law & enforcement agencies, civil government, and financial sectors along with private financial sectors^[6].

However, in 2015, the state declared the “National Risk Assessment for Money Laundering and Terrorism Financing (NRA)^[7]. In June 2017, risk-based approaches were launched, also known as the 4^th anti-money laundering (4^th AML) directives. This approach takes all the private sector in the loop to enforce them to comply with the rules and regulations according to the MLR 2017. Moreover, the recently amended action plan was considered in 2019 after the implementation of MLR 2017. The government has decided to amend the financial terror with more strict compliance, which was implemented on 10 Jan 2020.

So, this is the whole journey of ‘Anti Money Laundering (AML)” from 1989 to 2019 that have been done so far by the United States of Kingdom.

Most Significant Money Laundering Threats

After implementing the National Risk Assessment (NRA) of Money Laundering and Terrorist Financing; the administration of the United Kingdom (UK) has declared the more significant threat that can be harmful to the value of the state;

1. High-end money laundering
2. Finance professional who can do unlawful activities with professional manners
3. The role of international controller in crime
4. Modern slavery
5. Raising terror funds through exploitation in the financial sector
6. Charitable sector abuse.

Best Strategy So Far?

According to the study analysis, the “Risk” based approach strategy was best, which is also known as the 4^th Directives of money laundering (ML). This strategy covers all the aspects with better implementation^[8].

Why?

As MLR 2017 was the amended version of 2002 (money laundering), it also includes the financing terrorism act 2000, fraud act (2006), and transmission of funds (payers’ information). All the other strategies are based on this MLR 2017 act, which is very fruitful for the United Kingdom state to combat the money laundering issue.

Furthermore, it can reduce the chances of High-end laundering that could be possible by the finance professional due to the centralized system of law and enforcement agencies and private financial sectors. It could also control the role of the international controller from the crime due to the verification of the transaction.

In 2017, when the government implemented the National Risk Assessment (NRA), then they decided to consider the following points which make it more powerful to prevent money laundering;

1. A strong relationship with the private sector
2. Doubtful activity report regime
3. Joint money laundering (ML) intelligence taskforce (JMLIT)
4. Enhancing the law & enforcement responses
5. Increase the inspecting skills
6. Improve the efficiency of supervisory rule
7. More good relations with International Boundaries for information sharing
8. Executing the action plan

Hence, according to my best information and research, MLR 2017 strategy, which is based on the “Risk Assessment,” is the best strategy to monitor money laundering as previous strategies have some gaps in it to cope with the current scenario.