Money laundering is the Houdini stroke for criminals. It disguises their proceeds of crime, making the said proceeds appear to have a legitimate source.
The initial stage of the money laundering process is placement. Placement is when cash generated from criminal activities is placed in the financial system. This cash is directly injected into the system either through bank deposits or other dubious tactics of criminal ingenuity.
The stages of money laundering
The second phase i.e. layering, involves passing the criminal proceeds through complex transactions to conceal their origin. This stage often takes the money that is already in the system through international transactions in offshore accounts, companies and trusts. Funds are often moved both internationally and within national jurisdictions.
Finally, the proceeds enter the integration phase where they undergo a legitimate transaction. Some opt for rental properties, whereas others invest in shadow businesses that essentially assist in the layering stage through inflated invoices, overpriced products and even end up paying taxes for these transactions.
The menace of money laundering is felt when the economy losses out on legitimate revenue sources. Moreover, money laundering promotes criminal activities which endanger innocent lives. As a result, legal regimes around the world have heightened their efforts towards combating money laundering.
The United Kingdom is a global financial hub that recognizes money laundering as a universal problem hence passing the Proceeds of Crime Act 2002(POCA) as the main source of legislation addressing the issue. The National Crime Agency (NCA) is tasked with enforcing the POCA. Further, the legislation is supplemented by other regulations like money laundering, terrorist financing and transfer of funds regulations 2017.
In comparison to the United Kingdom, Kenya is a leading financial centre in Africa that has taken steps towards adopting anti Money Laundering laws. Kenya passed the Proceeds of Crime and Anti Money Laundering Act 2009(POCAMLA). The POCAMLA together with the Anti Money Laundering and Countering the Financing of Terrorism Amendment Act 2023 (AML/CFT) provide the legal framework for combating money laundering.
The laws and regulations mandate the Financial Reporting Centre to receive and analyse suspicious activities reports. Following the analysis, the Financial Action Task Force implements the regulations preventing money laundering and terrorist financing.
First, money laundering offences occur when a person with knowledge or a person whom under reasonable circumstances ought to have known that a certain property is a proceed of crime. Second, the said person thereafter enters into an agreement, arrangement or transaction in relation to the criminal property for purposes of:
- Concealing criminal property
- Arranging the use, retention or control over criminal property
- Acquiring criminal property
- Using criminal property
- Possessing criminal property
Therefore, for both United Kingdom and Kenya legal regimes on AML the offences relating to money laundering are as listed above. These offences are coupled with predicate offences that in essence operate on the assumption that for money laundering to occur, there must exist a criminal activity generating the criminal proceeds.
These predicate offences include corruption, bribery, human trafficking, extortion, kidnapping, illegal arms sale and drug trafficking. However, a person is still liable for prosecution on money laundering offences despite the absence of a conviction for the predicate offences.
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