They say history doesn’t repeat itself but I expect it will do so over money laundering when the new polymer £20 note comes into circulation next year.
A few years ago, the European Central Bank stopped producing 500 euro notes because of concerns that they were facilitating illegal activities.
The note had been dubbed the ‘Bin Laden’ because of its affiliation with terrorists. It was said to be favoured by drug lords and tax evaders too.
After production was phased out, one boat seller in Spain saw a 40,000 per cent increase in sales, as money launderers sought to get rid of their stockpiles of the notes.
When the new £20 note is issued, I foresee a spike in similar suspicious activity, unexplained banking and sudden increases in turnover in certain types of industries which are known hotspots for money laundering, such as car washes, restaurants and takeaways.
These are primarily cash businesses and will therefore become easy targets as people holding large sums of old £20 notes seek to launder them.
Banks are required as part of the drive to combat money laundering to ask questions of anyone walking in to deposit over £10,000 in cash, and their systems have algorithms which detect suspicious activity.
Customers seeking to pay in such large amounts of cash have to show the money is from a legitimate source.
From 2020, a drug dealer, for example, with a stash of old £20 notes that will soon become worthless will be unable to simply hand them over the counter at a bank without arousing suspicion.
I expect they will adopt other tactics instead, for example by giving the money in stages to a takeaway owner who ordinarily takes £1,000 a day to the bank. The criminals will ask the owner to deposit £2,000 a day and offer them a cut, with the money then being laundered through fictitious suppliers or being withdrawn in cash and returned to the crooks.
In addition, there is bound to be a rise in people buying high-value assets with large sums of cash, such as cars, jewellery and watches – to convert their dirty money into possessions.
Retailers in particular need to be prepared for this type of scenario, while businesses over a certain size must have a nominated money laundering reporting officer, whose duty is to report suspicious activity or transactions.
I also foresee a rise in the number of unexplained wealth orders being issued by the courts.
These were initially aimed at oligarchs and the like, but it would not surprise me if many more unexplained assets bought by people using old £20 notes come under scrutiny.
You can bet that suspected criminals who are suddenly seen driving around in an expensive car will be closely watched. Police have the power to seize the assets, and the owner will have to provide evidence of provenance.
I expect a significant number of criminals will be plunged into a state of panic when they are faced with having to quickly rid themselves of their old £20 notes. I expect many will put their heads above the parapet by splashing out on high-value assets, leading to an upturn in the number of unexplained wealth orders
An alternative ploy could be that criminals start using younger and older people in greater numbers to launder their cash.
Cifas, the not-for-profit membership group which collates data from more than 470 organisations, recently published its Fraudscape report which showed rising levels of fraud in the UK.
The number of cases increased by six per cent in 2018, with 323,600 recorded, although most agree the true figure is likely to be higher as many people are often too embarrassed to reveal they have been victims.
The report said society’s youngest and oldest are the most likely to be duped. They are increasingly being lured into acting as ‘money mules’ whereby they unwittingly help fraudsters to launder stolen money by using their legitimate bank accounts.
Fraudsters are constantly finding new methods to launder their cash.
Business owners must keep their wits about them, as an employee or partner may even be secretly or even unwittingly collaborating with criminals.
People involved in a business that could be at risk from money laundering should do their due diligence to prevent it occurring as far as possible.
At Inquesta we have extensive experience of assisting business owners in this respect, as well as those who have suspicions about money laundering activities. On the flip side, we are geared up to help people suspected or accused of money laundering with precharge advice and assistance over unexplained wealth orders.
The current scale of money laundering in the UK is staggering - the Law Commission says it costs the equivalent of £255 a year for every household. That figure could be dwarfed once the new £20 notes enter circulation.
The new note British artist JMW Turner will be the face of the new polymer £20 note when it is released next year.
His self-portrait will be the figure in the right-hand corner of the note, on the reverse side to the Queen. Behind his image will feature one of his most famous paintings, The Fighting Temeraire, which depicts HMS Temeraire at the Battle of Trafalgar in 1805.
Also on the note will be a quote by Turner: ‘Light is therefore colour’.
The Bank of England is yet to announce the launch date for the new note, which will resemble the recently-introduced £5 and £10 notes.
It says the new notes will be more durable, cleaner and more difficult for forgers to copy.
Tim Keeling is a vastlyexperienced forensic accountant with a focus on defendant work in cases involving white collar crime, tax fraud, money laundering and proceeds of crime orders.
He is a director at Inquesta, a forensic accounting practice with offices in Manchester and Leeds.
Tim heads Inquesta’s criminal dispute division, which deals with a large range of matters annually, including a considerable amount of criminal defence work for solicitors and barristers across the UK.
He has worked on more than 100 criminal defence assignments over the past few years.