Money laundering is basically dealing with money or property obtained or derived from criminal conduct, where the person concerned knows or suspects that it is criminal property.
From a tax perspective, the important thing to note is that ‘criminal property’ includes money and property gained through tax fraud.
So, if a person has money that they should have paid over to HMRC but have kept hold of it through tax fraud – that is a money laundering offence. That will also be true of someone who has money or property arising from some other person’s or company’s tax fraud, if they know or suspect that the money comes from tax fraud.
The offences are quite technical and they are currently in sections 327, 328 and 329 of the Proceeds of Crime Act 2002. However, the headline point is that someone who deals with the proceeds of their own or another’s tax fraud and who knows or suspects this to be the case can be prosecuted for money laundering.
If you are being investigated by HMRC in connection with income tax fraud or money laundering offences and penalties, please contact Patrick Cannon for an initial discussion or advice.
Frequently Asked Questions
Money laundering under the Proceeds of Crime Act 2002 carries a jail sentence of up to 14 years or a large fine. The sentence depends on the amount of money involved – the seriousness of the offence increases with the amount of laundered cash. Laundering drug money will typically lead to a higher sentence. The cash itself will also be subject to a confiscation order.
14 years in prison and a large fine.
- Unusual transactions or activity compared to a person’s normal dealings.
- Unexplained large cash deposits or constantly large balances.
- The use of large amounts of cash to purchase goods or services
You must carry out customer due diligence – including sanction and Politically Exposed Person (PEP) screening – to ensure your customers are who they say they are. This information must be recorded internally and kept up to date so that you can reassess your business risk if a customer’s circumstances change. Know your client!
Yes, and these defences to money laundering include:
- Not knowing or suspecting that the money or property were the proceeds of crime.
- An adequate price or consideration was paid in return for acquiring the criminal money or proceeds.
This last defence is relied on by lawyers when they are paid fees for defending people accused of criminal behaviour out of the proceeds of the crime. However, for this defence to stand up, the fees must be reasonable and the value of the work done should not be significantly less than the fees received.
The penalties for money laundering include up to 14 years in jail or a large fine, or both. The proceeds will also be subject to a civil or criminal confiscation order. The sentencing guidelines for money laundering offences offer useful indicators of the length of sentence likely to be given in particular circumstances.