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The financial role of the United

Kingdom
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The United Kingdom (UK) plays a leading role in European and world finance and
remains attractive to money launderers because of the size, sophistication, and
reputation of its financial markets. Although narcotics are still a major source of
illegal proceeds for money laundering, the proceeds of other offenses, such as
financial fraud and the smuggling of people and goods, have become increasingly
important. The past few years have witnessed the movement of cash placement away
from banks and mainstream financial institutions as these entities have tightened
their controls and increased their vigilance. The use of bureaux de change, cash
smugglers (into and out of the UK), and traditional gatekeepers (including solicitors
and accountants) to move and launder criminal proceeds has been increasing. Also
on the rise are credit/debit card fraud and the purchasing of high-value assets to
disguise illegally obtained money. Additionally, the Internet increasingly provides
criminals with a variety of money making opportunities and methods to launder
funds.
218 Money Laundering and Financial Crimes
The UK Threat Assessment conducted by the Serious Organized Crime Agency
(SOCA) estimated the annual proceeds from crime were between £19 billion
(approximately $32 billion) and £48 billion (approximately $80 billion) with
£25 billion (approximately $42 billion) representing a realistic figure for the
amount laundered each year.
Offshore center: No
Free trade zones: Yes
The UK has five designated Free Zones in which non-European Union (EU) goods
are treated as outside the customs territory of the EU for the purposes of import
duties until the goods are released for free circulation. Import VAT and excise duty

are also suspended until the goods are removed to the UK market or used or
consumed within the Free Zone. The Free Zones are located in Liverpool, Prestwick,
Port of Sheerness, Southampton, and Port of Tilbury.
Criminalizes narcotics money laundering: Yes
Criminalizes other money laundering, including terrorism-related: Yes
The Proceeds of Crime Act (POCA) of 2002 consolidates and expands pre-existing
legislation criminalizing money laundering. POCA covers all crimes as predicate
offenses. It also creates a new criminal offense, applicable to all regulated sectors, of
failing to disclose suspicious transactions.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports on Terrorism, which can
be found here: http://www.state.gov/s/ct/rls/crt/)
The Terrorism Act of 2000 criminalizes terrorist financing. Additionally, the
Terrorism (United Nations Measures) Order 2006 and the Al-Qaida and the Taliban
(United Nations Measures) Order 2006 provide the Treasury with designation
authority. The Counter-Terrorism Act of 2008 (CTA) came into effect on November
27, 2008. Schedule 7 of the CTA gives the Treasury additional powers to act against
terrorist financing and money laundering.
Know-your-customer rules: Yes
The Money Laundering Regulations of 2007 implement in part the EU's Third
Money Laundering Directive and include an obligation to establish and maintain
appropriate and risk-sensitive policies and procedures relating to customer due
diligence measures and ongoing monitoring, reporting, record keeping, and risk
assessment. Covered entities include credit and financial institutions, auditors,
accountants, tax advisers and insolvency practitioners, independent legal
professionals, trust or company service providers, estate agents, high value dealers,
and casinos.
Bank records retention: Yes
Pursuant to the Money Laundering Regulations of 2007, relevant persons must
retain transaction records and identity verification documents for at least five years.

Suspicious transaction reporting: Yes


Business sectors subject to formal suspicious transaction reporting (STR)
requirements include attorneys, solicitors, accountants, real estate agents, and
dealers in high-value goods, such as cars and jewelry. Sectors of the betting and
gaming industry that are not currently regulated are being encouraged to establish
their own codes of practice, including a requirement to disclose suspicious
transactions. In fiscal year 2008, 210,524 STRs were filed with the UK Financial
Intelligence Unit (UK FIU).

Large currency transaction reporting:


The UK government considered the feasibility of a fixed threshold currency
transaction reporting system, but made a policy decision not to introduce such a
system.

Narcotics asset seizure and forfeiture:


UK legislation, most notably the Serious Crime Act of 2007 which consolidates
existing laws on forfeiture and money laundering, provides for the confiscation of
laundered property which represents proceeds from, instrumentalities used in, and
instrumentalities intended for use in the commission of money laundering, terrorist
financing, or other predicate offenses, and property of corresponding value. The UK
has in place four different schemes for confiscation and recovery with regard to
proceeds of crime: confiscation following a criminal conviction, civil recovery,
taxation, and seizure-forfeiture of cash.

Narcotics asset sharing authority:


The UK is able to share confiscated and forfeited assets with other countries that
have assisted operations to bring the confiscation to fruition. The UK has authority to
share up to 50% of the proceeds of confiscation, net of costs. The UK can share with
other countries on an ad hoc case-by-case basis.
Cross-border currency transportation requirements: Yes
The Control of Cash (Penalties) Regulations of 2007 provides for penalties for failing
to declare movement of cash amounting to 10,000 (approximately $14,500) or
more into and out of the European Community.

Cooperation with foreign governments: Yes


The UK cooperates with international anti-money laundering authorities on
regulatory and criminal matters.
U.S. or international sanctions or penalties: No.

Enforcement and implementation issues and


comments:
Businesses in the UK that are particularly attractive to money launderers are those
with high cash turnovers and those involved in overseas trading. Illicit cash is
consolidated in the UK, and then moved overseas where it can enter the legitimate
financial system, either directly or by other means such as purchasing property or
trade goods. Because cash is the mainstay of the illicit narcotics trade, traffickers
make extensive use of money transmission agents (MTA), cash smuggling, and
alternative remittance systems such as hawala to transfer money and value from the
UK.

U.S.-related currency transactions:


No information available.

Records exchange mechanism with U.S.:


A Mutual Legal Assistance Treaty (MLAT) between the US and the UK has been in
force since 1996, and the two countries signed a reciprocal asset sharing agreement
in 2003. There is a memorandum of understanding (MOU) in force between the U.S.
Immigration and Customs Enforcement and HM Revenue and Customs. The U.S.
Department of Treasury's Financial Crimes Enforcement Network also signed a
MOU with the UK in 1995 and regularly exchanges information with the UK FIU.

International agreements:
The UK is a party to various information exchange agreements with countries in
addition to the United States. Authorities can share information or provide
assistance to foreign jurisdictions in matters relating to money laundering or other
financial crimes without need for a treaty. While the UK legislative framework does

not require MLATS, the UK has signed treaties with over 30 countries in order to
execute requests.
The UK is a party to:
220 Money Laundering and Financial Crimes
the UN Convention for the Suppression of the Financing of Terrorism - Yes
the UN Convention against Transnational Organized Crime - Yes
the 1988 UN Drug Convention - Yes
the UN Convention against Corruption - Yes
The UK is a member of the Financial Action Task Force (FATF). Its most recent
mutual evaluation can be found here:
http://www.fatf-gafi.org/dataoecd/55/29/39064399.pdf

Recommendations:
The United Kingdom has a comprehensive AML/CFT regime. The UK should
continue its active participation in international fora and its efforts to provide
assistance to jurisdictions with nascent or developing anti-money
laundering/counter-terrorist financing regimes.

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