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Proceeds of Crime Act and the new Money Laundering Regulations - Will the Police be able to Cope?

Added: (Thu Jun 05 2003)

Pressbox (Press Release) - The recently introduced far-reaching Proceeds of Crime Act 2002 (POCA) raises a significant question says Timon Molloy, editor of Fraud Intelligence: will the UK’s under-resourced police forces be able to cope with the predicted huge increase in Suspicious Activity Reports (SARs) resulting from the new money laundering provisions?

By virtue of the ‘all crimes coverage’ of Part VII of POCA, possession of criminal assets is now a money laundering offence and sections 330 and 331 introduce a negligence test for reporting money laundering suspicions. “It is no longer a defence to claim simply that you were not suspicious, the question now is, should you have been?” said Timon Molloy “This will inevitably lead to a rise in defensive reporting.” 56,000 SARs were filed with the Economic Crime Branch of the National Criminal Intelligence Service (NCIS) in 2002. Reports are already running at about 7,000 per month this year. The rate is set to increase dramatically in the Autumn when the regulations are extended, in line with the second EU money laundering directive, to cover accountants, lawyers, estate agents, casinos and dealers in high value goods.

Reports filed with NCIS are directed to the appropriate local police force for investigation. The Metropolitan Police Service, which receives 25% of all SARs, was only able to convert about a quarter of these into usable intelligence. Across the UK there are 1,500 Financial Investigators who focus on such reports, 1,100 are in the police. An NCIS spokesman noted recently that the South Wales Constabulary has only two financial investigators qualified to give ‘consent to transact’ authorisation in response to the SARs it receives.

Section VII of POCA now means that the companies covered by the legislation, which at present is essentially the financial services industry, will be required to report any instances, no matter how small, of internal fraud to NCIS. Ernst & Young’s latest fraud survey reveals that employees committed 85% of the worst frauds. Whereas previously companies preferred to dismiss the offender quietly to save any potential public embarrassment, they are now obliged to file a report with NCIS. Auditors, when covered by the legislation in September 2003, will also be required to report any suspicion of fraud when reviewing a company’s books.

“Successive governments have failed to view combating financial crime as a policing priority. Indeed, it is barely mentioned in the National Policing Plan 2003-2006, even though the Home Office’s own latest figures show that fraud is costing the country £13.8billion per year,” said Timon Molloy. Resources in this area are being seriously depleted with some police forces in the East Midlands having no fraud squad officers and figures from 2001 revealed that only a total of 550 police officers were working on fraud, of whom two-thirds were available on any one day.

Timon Molloy concluded, “More resources need to be provided to the UK’s police forces for front-line white collar crime investigations if the toughest proceeds of crime legislation in the world is to be matched at last by effective action against fraud and money laundering. Anything less would be, well, little short of criminal.”


Notes to Editor:

1. Timon Molloy joined Informa Professional publishing in September 1999 as Editor of Compliance Monitor, Fraud Intelligence and Money Laundering Bulletin. Timon continues to develop these publications, which are the leading authorities in their respective fields. Read by professionals and practitioners, subscribers include household-name financial institutions, leading law and accountancy firms and major corporates as well as public sector bodies that include the Serious Fraud Office, the Financial Services Authority and the Bank of England. Timon has extensive knowledge of the developments, legislation and regulatory requirements across the compliance, anti-money laundering and combating fraud areas.

2. Timon’s full article on the implications of the Proceeds of Crime Act 2002 appears in the June 2003 issue of Fraud Intelligence.

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