Money laundering thrives on ingenuity and apathy

KEY part of this week's Government crime package are measures designed to hit criminals where it hurts - in their pockets. The power to freeze assets provides the authorities with a new approach to tackling crime, but it remains to be seen how successful this approach will be, with the Garda and the Revenue Commissioners so far having had limited success in chasing the fruits of crime.

Money laundering has proven very difficult for the authorities to combat, despite rules obliging financial institutions to disclose suspicious transactions. Laundering effectively makes ill gotten money legitimate and by doing so has made - and will continue to make - it difficult for the authorities to trace criminal assets and to act. Before freezing assets the authorities will first have to identify them. What of the powers already in place?

Financial institutions have made 130 "disclosures" to the Garda this year, where they suspected that a customer might be involved in money laundering. There were 199 disclosures last year. In all, these disclosures related to amounts totalling £23 million.

Not all of this money is derived from ill gotten gains. The Garda have obtained court restraints in four cases, freezing the funds involved. To freeze funds, it is usually necessary for a person to be charged before the courts. Applications seeking a Restraint on Assets - an order freezing funds - can be made in court. After a conviction for a drug offence or a serious criminal offence, a court can order the confiscation of restrained funds.

Applications by the Garda Bureau of Fraud Investigation have been sought through the courts to get further information and documentation from the financial institutions about clients, in several instances. Financial institutions do not provide supporting documentation when they initially make a disclosure.

Financial institutions may unwittingly provide a means by which dirty money may be laundered. It is up to An Post, banks, building societies, credit unions, stockbrokers and insurance companies to satisfy themselves as to the identity of anyone opening an account or involved in a transaction of more than £10,000. If the financial institution has a doubt, it is obliged to report its misgivings. Criminals or accomplices in money laundering, now face jail terms of up to 14 years. Following the EU legislation to counter organised crime, which came into effect last year, financial institutions are required to blow the whistle on people suspected of laundering drug money and funds generated through blackmail, bank robbery, terrorism, extortion, fraud and other crimes.

Failure to report suspicions of money laundering can leave the staff of financial institutions open to a range of penalties including a fine or five years in jail. A breach of client confidentiality is not deemed to have happened, where such a matter is reported to the Garda.

One of the easier ways to launder money is to buy an offshore company. Money lodged by this company can be transferred electronically around the globe. The tax amnesties of recent times allowed criminals to clean the proceeds of crime. With a ready supply of clean cash underworld figures were enabled to buy legitimate businesses. Thereafter, laundering funds became easier. The trail of hot money can also be made to go cold, through cash purchases of expensive items such as real estate, boats, jewels and antiques.

The current legislation does not cover the business activities of solicitors, betting offices and publicans, though this may change. A dishonest bookmaker for instance, could enter a bet on his books after a horse has won a race at a high price. For a commission, the bookie could then pay over "winnings" to a client, with the client's own money.

There were 600 disclosures to the police in Britain in the first year after legislation was introduced there in 1987. There are now 15,000 disclosures per year.