Content area
Full Text
Money laundering is defined in the Proceeds of Crime Act (POCA) 2002. The Act sanctions the primary money laundering offences of concealment [1], arrangements [2], acquisition, use and possession of proceeds of crime [3]. Owing to the serious implications of money laundering, countries have come together to tackle money laundering problems. At the inter-governmental level, the Financial Action Task Force’s (FATF) 40 Recommendations are recognised as the international standard for anti-money laundering (AML) regulations (FATF, 2012/2018). In terms of regional effort, the European Union’s (EU) Fifth Money Laundering Directive will come into force in early January [4]. These initiatives have important implications for the shaping of the UK’s AML framework.
The AML regime extends beyond the punishment for the main conduct of money laundering. Because of the application of a risk-based approach (RBA), the regime also focuses on sectors that are exposed to substantial money laundering risks. Particularly, the banking sector is one of the high-risk-profile industries as it is where criminals often inject into the financial system and divert their “dirty money”. In fact, in 2012, HSBC was found facilitating money laundering of $881m for drug cartels (Viswanatha and Wolf, 2012). The recently revealed money laundering scandal involves Danske Bank failing to monitor suspicious transactions amounting to more than €200bn, of which majority originating from politically exposed persons (PEPs) (Jensen, 2018). In light of the severity of ramifications of money laundering, these scandals revealed the role of banks in the efforts of combating money laundering.
There are measures in place to punish banks who failed to monitor and control their risk exposure to money laundering. The Money Laundering Regulations (MLR) 2017 impose obligations on banks to conduct customer due diligence (CDD) [5] [6], maintain relevant records [7] and provide training to employees [8]. A more important component of the UK’s AML framework is the suspicious activity report (SAR) regime under the POCA 2002, which sanctions individuals failing to report to the authority of suspicious activity [9]. These secondary money laundering offences, in contrast to the primary offences, are risk-based sanctions aimed at making the banks the gatekeeper for money laundering. However, this essay argues that these measures have failed to achieve their goals to deter banks from abusing their products and services to facilitate...