As we know that for every problem there must be a cause, if we try to reduce that cause or remove altogether then the chances of problems also reduced or removed. For this situation, according to the Act the employees of the companies must be aware about the causes of this offence its obligations, penalties and possible effects. They must know how to deal and avoid from this offence.
In some of the organizations a proper training is given to employees about the law of money laundering.
As we have discussed previously that money launderer try to destroy the original source of money in whole process of money laundering. So some procedures must be used by all companies or organizations which retain the complete data of customers, suppliers and all other company officers with their passports to avoid from the risk of money laundering.
A complete history and full data of customers must be retained by the companies and the extent of their business relationship.
In some of the organizations an officer is appointed known as Money Laundering Reporting Officer (MLRO), he is an expert person to investigate or report to the authorities about the suspicions.
1 Role of financial service authorities in relation to Money laundering
Financial service authorities provide anti-money laundering rules and regulations to the investment firms as these firms are more sensitive to this offense.
These regulations are also similar to the previous given but these are separate for investment firms which must be followed by them. FSA monitors the anti-money laundering regulations in firms. They must ensure that;
- MLRO money laundering reporting officer is appointed in the firms to ensure all necessary steps are taken by the management in relation to anti money laundering.
- Internal reporting procedures are put in place to identify suspicious transactions and dealings.
- A proper data is collected like name, address, photograph, passport from the stakeholders and copies of all other documents necessary in their dealings. These records then retained for five years even after the end of relationship.
- Anti-money laundering training is given to all employees and senior managers.
- Report of suspicions to MLRO by the employees and officers.
- All the suspicious transactions must be investigated by MLRO.
- Control systems and procedures are put in place and working efficiently in relation to anti-money laundering.
- The persons who are suspicions or under investigation must retain in the company on job until process completed.
Effects of money laundering in relation to other offenses
Money laundering gives rise to some other offences which are also regulated under the money laundering regulations 2007.
- Failure to report
- Tipping off
Laundering: during money laundering some other people also involved who gave assistance to this process at the behalf of person who actually want to conceal this money. So those assisting people also involved in laundering process and considered as criminals.
They help the original criminals and assist them through concealing, transferring and retaining illegal money or property.
Laundering offense is also punishable up to fourteen years of imprisonment of fine.
Failure to report: under the legal framework, all the employees or officers working in the organizations have duty to report any suspicious of money laundering to MLRO. If someone knew and failed to report, he commits an offence.
This offence is punishable up to five years of imprisonment and fine.
Tipping off: it is simply giving a hint to suspicion that may prejudice the investigation of money laundering. So it gives an opportunity for criminal to reduce the risk of investigation
It is also a criminal offence so punished for five years of imprisonment and fine.
2 Fraudulent and wrongful trading
Fraudulent trading is a civil offense as well as a criminal offence.
Fraudulent trading occurs when business is developed specifically to defraud their creditors and other stakeholders or any other fraudulent purposes.
It is very difficult to determine about the fraudulent trading
Mostly directors and senior officers involved to carry out fraudulent trading.
For example a director enters in a agreement to purchase vehicle knowingly that business financial position is not good. After it the business goes into liquidation and creditors claim for the payment. In this directors are liable because intention was to defraud creditors because unsecured creditors not surely paid after liquidation.
In fraudulent trading only the persons who are involved to in it are punished and considered as liable for financial loss.
This offence is mostly seen in the companies a little before liquidation. In addition to defraud creditors they take large deposits in advance by the customers and promised to deliver goods but before the delivery time business goes into liquidation.
During liquidation process facts came to know by liquidator. So he can bring a case in court about the wrongful trading and the parties involved in it are punished.
Under the civil law its penalty is financial in nature and under the criminal law it is difficult to prove, it requires evidences and after it the court decided the personal liability and fine.
Morphites v Bernasconi 2001
In this case law directors are personally liable to pay the unpaid rent for lease payment and a fine for dishonesty also.