Lawyers and the Proceeds of Crime

The Facilitation of Money Laundering and its Control

Katie Benson

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9781032237138
• eBook ISBN: 9781351717236
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

The role played by legal professionals in the laundering of criminal proceeds generated by others has become a priority concern for authorities at national and international levels. This ground-breaking book presents an in-depth empirical analysis of the nature of lawyers' involvement in the facilitation of money laundering and its control through criminal justice and regulatory mechanisms. It is based on qualitative research combining analysis of cases of lawyers convicted of money laundering offences with interviews with criminal justice practitioners, members of professional and regulatory bodies and practising solicitors, and analysis of relevant national and international legislative and regulatory frameworks.

The book demonstrates the complex and diverse nature of lawyers' involvement in laundering activity, and shows that their actions and the decisions they take must be understood in relation to the specific situational contexts in which they occur. It provides significant new insights into the criminal justice and regulatory response to professional facilitation of money laundering in the UK, raising questions about the effectiveness and appropriateness of the response and the challenges involved. The book develops a framework for future research and analysis in this area, and proposes a range of potential strategies for controlling the facilitation of money laundering.

Lawyers and the Proceeds of Crime is essential reading for those researching money laundering, white-collar crime or organised crime, and for practitioners and policy makers concerned with preventing the facilitation of money laundering.

1 Introduction

In 2010, Bhadresh Gohil, a London-based solicitor, was convicted of a range of offences under the Proceeds of Crime Act (POCA) 2002. The charges were related to the laundering of millions of dollars defrauded from the people of Delta State in Nigeria by its then governor, James Ibori. Ibori was jailed for 13 years in 2012 for frauds totalling nearly $77 million, including a $37 million fraud relating to the sale of Delta State’s share in a mobile phone company. It was involvement in the laundering of the proceeds of this particular offence for which Bhadresh Gohil was convicted. Gohil was found to have created a series of complex financial transactions to move and conceal the origins of funds on behalf of Ibori, involving off-shore trusts and shell companies, and allowed his firm’s client account to be used for the transfer of criminal proceeds. He was also found to have facilitated the purchase of a $20 million Challenger jet on behalf of Ibori, concealing Ibori’s ownership of the jet by devising ‘a sophisticated money laundering scheme to ensure that the ownership of the jet was made as complicated and as obscure as possible’.¹ Gohil was sentenced to a total of ten years’ imprisonment for various offences including money laundering and conspiracy to defraud. He was subsequently struck off the roll of solicitors in the UK by the Solicitors Disciplinary Tribunal.²

1R v James Onanefe Ibori [2013] EWCA Crim 815, para. 14.

2Solicitors Disciplinary Tribunal Case No. 10927–2012; R v James Onanefe Ibori [2013] EWCA Crim 815.

In 2012, Andrew Tidd, a conveyancing solicitor³ from a medium-sized legal practice in Liverpool, UK, was convicted under the offence of ‘Failure to disclose: regulated sector’. The ‘failure to disclose’ offence, set out in section 330 of POCA 2002, contains provisions to enforce the disclosure of suspicious transactions by members of particular sectors considered to be vulnerable to money laundering (e.g. lawyers, accountants, estate agents, trust and company service providers), making it a criminal offence to fail to disclose knowledge or suspicion that another person was engaged in money laundering. Over a four-year period, Andrew Tidd had acted in several transactions for a client, including conducting the conveyancing for the purchase of two residential properties. The £26,000 paid as deposits for the two properties is believed to have come from criminal activity. Following his conviction, Tidd appeared before the Solicitors Disciplinary Tribunal. Both the trial court and disciplinary tribunal concluded that Tidd had ‘not known or, indeed, suspected that [his client] was involved in money laundering’, but ‘had information which … gave reasonable grounds for knowing or suspecting’ such involvement.⁴ On this basis, Tidd was convicted on five counts of ‘failure to disclose’ suspicions of money laundering and sentenced to four months’ imprisonment, suspended for 12 months. At the disciplinary tribunal hearing, he was ordered to pay a fine of £2,500, but he was not struck off the roll of solicitors.⁵

3Conveyancing refers to the legal and administrative work required for the transfer of property.

4Solicitors Disciplinary Tribunal Case No. 11178–2013, para. 13.3.

5Solicitors Disciplinary Tribunal Case No. 11178–2013.

In both of these cases, the solicitor played a role in the way that their client used, moved or concealed the origins of the proceeds of crime. The form this role took, the actions and processes involved, and the amount and source of the criminal proceeds all vary. However, both Bhadresh Gohil and Andrew Tidd can be considered to have in some way facilitated money laundering on behalf of their clients by way of their position as legal professionals.⁶

6These cases are just two examples of solicitors’ involvement in the facilitation of money laundering, selected to highlight some of the different ways that this can occur. These and other cases will be discussed further throughout the book.

The facilitation of money laundering by legal professionals

The role of legal professionals in the laundering of criminal proceeds generated by others has become a priority concern for intergovernmental bodies, law enforcement authorities and policy makers at both the national and international level. At the international level, this concern can be traced back to the statement adopted at the 1999 G8 Conference on Combating Transnational Organized Crime, in Moscow, which highlighted ‘those professionals, such as lawyers, accountants, company formation agents, auditors, and other financial intermediaries who can either block or facilitate the entry of organized crime money into the financial system’ (Moscow Communiqué 1999, para. 7). The statement suggested that such ‘gatekeepers’ to the financial system should become subject to the anti-money laundering requirements already faced by banks and other financial institutions (Moscow Communiqué 1999, para. 32). Four years later, the Financial Action Task Force (FATF) Recommendations on money laundering were revised to extend responsibility for performing customer due diligence and reporting suspicious activity to certain non-financial businesses and professions, including lawyers, notaries and other independent legal professionals; accountants; trust and company service providers; and real estate agents (FATF 2003). The FATF has subsequently published a number of reports highlighting the vulnerability of the legal profession to being exploited for the purposes of money laundering (e.g. FATF 2008, 2013).

In the UK, the government’s 2013 Serious and Organised Crime Strategy first drew attention to the ‘[c]omplicit, negligent or unwitting professionals in the financial, accountancy and legal professions’ that ‘facilitate money laundering on behalf of organised criminals’ (Home Office 2013: 14), describing how these ‘professional enablers’ help organised crime groups to invest in property or set up front businesses to launder the proceeds of their crimes (Home Office 2013: 48). More recently, UK threat and risk assessments have concentrated on the role of professional enablers in relation to economic crime rather than ‘traditional’ organised crime, with a particular focus on their involvement in ‘high-end’ money laundering (e.g. NCA 2015, 2018, 2019; HM Treasury/Home Office 2015, 2017). High-end money laundering, distinguished from the ‘cash-based’ money laundering carried out by groups involved in illicit market activity such as drug distribution, for example, is associated primarily with serious frauds, overseas corruption and tax evasion (NCA 2014) and is defined as ‘the laundering of large amounts of illicit funds through the financial and professional services sectors’ (NCA 2018: 39). Of particular concern in relation to high-end money laundering is the use of corporate structures to conceal the origin and ownership of funds, the movement of illicit funds through complex financial arrangements and offshore jurisdictions, exploitation of capital markets, and investment in the super-prime property market.

In 2015, the UK published its first National Risk Assessment of Money Laundering and Terrorist Financing (HM Treasury/Home Office 2015), followed by a national action plan intended to reform anti-money laundering and counter-terrorist financing measures (Home Office/HM Treasury 2016). In 2017, a follow up National Risk Assessment was produced, to assess the implementation of the action plan and lay out the areas of most concern in relation to money laundering and terrorist financing (HM Treasury/Home Office 2017). The document assessed legal services to be at ‘high risk of exploitation for money laundering’, suggesting that the areas that present the greatest risk are trust and company service provision, conveyancing and client account services (HM Treasury/Home Office 2017: 49). The potential for legal professionals’ services or skills to be used for money laundering purposes is also a significant concern for the profession itself, and preventing its members from becoming involved in money laundering has become a priority for the legal profession and those who regulate it. Legislative and regulatory frameworks that emerged out of the global anti-money laundering regime have imposed a number of obligations on legal professionals, aimed at preventing their involvement in money laundering (alongside the criminalisation of money laundering; see Chapter 2). These preventative obligations have significant potential implications, as lawyers and other ‘regulated’ professionals can face serious consequences for failing to meet them. Thus, legal professional and regulatory bodies put considerable effort into identifying potential money laundering risks and ‘red flags’ within the sector, and advising their members on how to avoid these risks (see, for example, IBA 2014; LSAG 2018; SRA 2018a).

Aims of the book

Despite the concern surrounding the involvement of legal professionals in the facilitation of money laundering, and the proliferation of measures intended to prevent and control it, there has been little empirical research or other academic attention focused on this area. Much of the existing literature discusses legal professionals’ role in money laundering in the context of them providing assistance to organised criminals more widely (Chevrier 2004; Di Nicola and Zoffi 2004; Lankhorst and Nelen 2004; Levi, Nelen and Lankhorst 2004; Middleton and Levi 2004, 2015; Nelen and Lankhorst 2008), or in relation to other forms of wrongdoing by the legal profession, such as mortgage or investment fraud and theft of client money (Middleton 2008; Middleton and Levi 2004, 2015). Bell (2002) considered cases of lawyers convicted of money laundering offences in the UK and the US, describing the services provided by the legal profession that may be of use to those wishing to launder criminal proceeds. Schneider (2005) and Cummings and Stepnowsky (2011) provided the primary previous empirical examinations of the nature and extent of lawyers’ involvement in money laundering, in Canada and the US respectively, while Soudijn (2012; see also Soudijn 2014) examined ‘financial facilitators’ more broadly, looking at cases of assistance provided to criminals in relation to money laundering by a variety of actors in the Netherlands. Others have focused on legal professionals’ understanding and interpretation of their ‘gatekeeper’ role. For example, Helgesson and Mörth (2016, 2018, 2019) conducted interviews with lawyers in Sweden, France and the UK to examine their views on their anti-money laundering obligations, and Kebbell (2017) addressed this aspect with transactional lawyers at some of the largest law firms in the UK.

The potential for legal professionals to facilitate the laundering of the proceeds of serious organised and economic crimes, the vulnerability of the profession to exploitation by individuals in possession of criminal proceeds and the considerable reach of the legislative, regulatory and policy frameworks which have been developed to prevent this mean that there is a clear need for research and analysis in this area. This book provides the most significant empirical and theoretical contribution to the subject to date, but also highlights a number of remaining analytical, conceptual and theoretical gaps and develops an agenda for further research. The book considers the nature of legal professionals’ involvement in the facilitation of money laundering, and its control through criminal justice and regulatory mechanisms, combining empirical data and theoretical debates to provide new insights into this under-researched and under-theorised area. It challenges conceptualisations of the facilitation of money laundering which suggest a singular phenomenon and decontextualise the actions and decision-making involved, drawing attention to the situated nature of these actions and the factors that shape them. By analysing relevant legislation and regulations, as well as the array of professional, regulatory and criminal justice bodies involved in the current response to the facilitation of money laundering by legal professionals in the UK, this book raises questions about the effectiveness and appropriateness of this response and its implications for legal professionals. Finally, the book identifies a range of potential strategies for controlling the facilitation of money laundering.

The book is based partly on empirical research carried out between 2012 and 2015, which collected and analysed data on a number of cases of solicitors convicted for offences related to their involvement in the laundering of the proceeds of crimes committed by others, alongside data from qualitative interviews with individuals working in the criminal justice system, relevant regulatory and professional bodies, and the legal profession itself. This is combined with analysis of current (at time of writing) legislative and regulatory frameworks (UK and international), and relevant policy documents from government, law enforcement organisations, and professional and regulatory bodies. The theoretical and conceptual framework for the analysis, which is detailed in Chapter 3, draws on research and scholarship in the fields of ‘organised crime’ and ‘white-collar crime’, and locates legal professionals’ involvement in money laundering at their intersection.

Scope of the research: the legal profession and the UK context

Concern about the facilitation of money laundering relates to a broader range of occupations than just the legal profession, and there are themes within this book that will apply across this range. However, there are a number of issues which are specific to the legal profession and legal professionals, and a focus on this particular group allows these to be fully explored. The book focuses primarily on the UK; while it takes account of wider contexts such as the global anti-money laundering regime and EU-level legislative frameworks, most of the data and analysis relate to the UK. There is some variation in the structure of the legal profession and its regulation, and in policing structures, between different parts of the UK, but there are commonalities in relation to the nature and control of the facilitation of money laundering. The empirical work for this book was carried out across the jurisdictions of England and Wales and Scotland. The book highlights where regulatory and policing structures differ, but in the main considers the nature of legal professionals’ involvement in money laundering as a common phenomenon.

There are various types of legal professionals, and the roles they play and titles they are given differ between countries. The terms ‘legal professional’ and ‘lawyer’ are used interchangeably throughout this book. Within the UK legal system, there are two main categories of lawyer: solicitors and barristers (in Scotland, barristers are known as advocates). Solicitors form the largest part of the legal profession; they provide expert legal advice and assistance on a range of matters, and usually have direct contact with clients. Barristers are legal advisors and courtroom advocates, representing clients in court. While barristers fall under the scope of anti-money laundering regulations, the risk of money laundering and focus of anti-money laundering policies are more relevant for solicitors, as they handle clients’ money and participate in certain transactions and services. The UK Money Laundering Regulations, following the FATF Recommendations, apply to ‘independent legal professionals’ – which they define as ‘a firm or sole practitioner who by way of business provides legal or notarial services to other persons’ – when participating in financial or real property transactions concerning:

• (a)the buying and selling of real property or business entities;
• (b)the managing of client money, securities or other assets;
• (c)the opening or management of bank, savings or securities accounts;
• (d)the organisation of contributions necessary for the creation, operation or management of companies; or
• (e)the creation, operation or management of trusts, companies, foundations or similar structur...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Dedication
• Contents
• List of figures and tables
• List of abbreviations
• List of cases
• Acknowledgements
• 1 Introduction
• 2 Money laundering and the anti-money laundering regime
• 3 Framing the research: ‘organised crime’ or ‘white‑collar crime’?
• 4 The nature of ‘facilitation’: diversity, complexity and context
• 5 Opportunity and vulnerability: factors influencing lawyers’ involvement in money laundering
• 6 On the ‘borders of knowingness’: understanding complicity, knowledge and intent
• 7 Knowledge and suspicion in the legislative framework
• 8 Criminal justice and regulatory responses to the facilitation of money laundering
• 9 Understanding and controlling the facilitation of money laundering: a research and policy agenda
• Appendix: convictions, disciplinary proceedings and sanctions
• Bibliography
• Index