If you are anything like me, your view of money laundering is that it is the playground of drug lords and the mafia. Well, I have recently been reading some of the UK Anti Money Laundering legislation (and, yes, I DO have a life!!!) and it was a hugely surprising read.
Apart from it’s complexity, money laundering is far more invasive than I think any of us expect. As I read the legislation I realised that almost everyone could be found guilty of money-laundering. Not that we would all go to jail for it but guilty nonetheless.
In the UK money laundering is widely defined and includes all forms of using or possessing criminal property and/or facilitating it’s use or possession. Whilst that, in itself, is not a terribly frightening concept, it’s the definition of “criminal property” and “criminal conduct” that are most interesting.
‘Criminal property’ is ANY property that constitutes or represents a person’s benefit from ‘criminal conduct’, (including overseas conduct which would be unlawful if it took place in the United Kingdom).
"Criminal conduct" is all conduct which constitutes an offence in any part of the United Kingdom.
Now some things are easy to see as criminal conduct and most of us wouldn’t even dream of getting involved with them - washing out drug money or funding terrorist activity comes to mind. But bribery is a crime in the UK so, as a South African (or anyone else) living in the UK, if you bribed a government official to get something done “back home” you are guilty of “criminal conduct”!
Now, we all know that bribery and corruption are rife in Africa (and many other parts of the world including the USA) so where does that leave us normal folk!
Many years ago I was involved with tendering to supply some software to a local municipality in South Africa. At the time we were the least expensive by far and were 100% local content so we ticked all the boxes for the tender rules. As it turned out the municipality “chose” an international competitor who was SUBSTANTIALLY more expensive then every other tenderer. In itself that’s not necessarily a bad thing but the interesting part of it was shortly after the tender closed I saw the IT manager in a brand new, very expensive, BMW.
So let’s skip forward to today – from a UK perspective that company would be guilty of “criminal conduct” as would the sales person, directors, accounting staff and anyone else that was involved.
But let’s tone the story down a bit! Tax evasion is “criminal conduct” and even some tax AVOIDANCE efforts can be classified as “criminal conduct”.
Tax evasion starts when you claim a bit you shouldn’t claim in your tax returns. That “home office” that isn’t really a home office. The travel log that you didn’t actually keep but just made up when it was time to do your tax return. That “office equipment” you bought that isn’t actually for the office.
But it’s not all about tax!
What about the overpayment someone made to your business that you haven’t told them about and will just write back to profit after a few years? In terms of the law that constitutes fraud and fraud is “criminal conduct”.
Transfer pricing without sufficient commercial rationale is “criminal conduct”.
Another South African (and actually worldwide) favourite – inflated value invoices where the value received is substantially less than the invoice value. In this regard there are several, ostensibly legitimate, credible and very high value international companies involved.
So don’t just think that money laundering is the realm of hardened criminals. Even normal folk who haven’t always been meticulously honest in their tax returns are classified as “money launderers”.
Then, of course, you may argue that the amount involved is so small!!!!. Interestingly the legislation has no “de minimis” amounts. That means even 1 penny or 10 cents counts!
It’s a bit frightening to think that probably everyone is guilty, at some time or another, of money laundering. Perhaps the saving grace for most people is that there are always bigger fish to fry and we will probably never be brought to book for our “de minimis” amounts!