July 28 2016
There are numerous case studies of how money has been laundered through the UK, a systematic examination of which would begin to fill some of the current gaps. Two schemes originating in post-Soviet jurisdictions help to identify certain risks. The UK is often only one part of the broader intelligence picture that should be analysed more fully to understand the real money-laundering risks. The first case study concerns what has been dubbed the ‘Russian Laundromat’. It involved two UK-registered companies signing a bogus contract, with one company lending a fictitious amount of money to the other. When the borrower purported to refuse to repay the debt, the guarantors of the loan, based in Russia, took the case to Moldovan courts. A corrupt and complicit judge then certified the fake debt as enforceable, and money was transferred from the Russian guarantors to the ‘lending’ company’s account which, as in many such cases, was situated in Latvia.
By analysing such case studies, a fuller picture of where the UK fits into these schemes begins to form. Money-laundering ‘red flags’ can be more specifically identified and better prioritised by sector or business activity. Better questions can be asked as to why a company is structured or transacts in the way it does. It will also help to identify which jurisdictions the relevant supervisors and law enforcement could connect with more to build a fuller intelligence picture, with Latvia a good example. Without this, a ‘risk-based approach’ will continue to go only as far as the integrity and interpretation of the company in question.