Frequently asked questions

Criminals have to find a way of making the money they get from their criminal activities "clean". They try to launder their "dirty money" by getting it into the financial system without detection or arousing suspicion. If they can get their "dirty money" into the financial system they can then transfer it between different bank accounts or financial products in the UK or abroad, or use it to buy goods and services. The idea is to make the "dirty money" look like it has come from a legitimate source. Criminals try to make it as hard as possible to connect the money with its criminal past.

The FSA's remit (which stems from our Statutory Objectives) concerns the extent to which the financial services firms that we regulate can be used by criminals to launder money. We therefore focus on how criminals are able to integrate the proceeds from their illegal activities into the legitimate financial sector.

Measuring the extent of money laundering is extremely difficult due to the secret nature of the markets involved. Previous attempts to estimate the size of the problem using a money laundering proxy have largely proved unsuccessful.

A number of estimates can be used in order to measure the scale of the problem. An IMF assessment (1996) suggested that money laundering was equal to 2-5% of global GDP. This range is often used to estimate the size of the money laundering problem in the UK.

In 1999 HM Customs and Excise used the IMF methodology approach to estimate that ML in the UK was in the range of £19-48 billion. Applying the same methodology today gives an estimate of £23-57 billion.

Money Laundering is principally about the concealment of the origins of revenue generated by acquisitive crime. That means that money laundering is a vital part of the operations of many of society's most anti-social and harmful individuals and organisations. Drug dealers, people traffickers, burglars, fraudsters, robbers, illegal arms dealers and smugglers are among those who use the financial system to launder money. When one makes money laundering more difficult, one makes it more difficult to live a life of crime. That can only be a benefit to society.

The FSA seeks to implement a risk-based approach in its fight against money laundering. This means that we allocate our resources and efforts to where we perceive the greatest threat to our statutory objective to reduce the extent to which the firms we regulate can be used for a purpose connected with financial crime.

Criminals tend to be dynamic and flexible in their efforts to launder money and avoid detection, they look to see where they can make the greatest illegal profits and where the chances of detection and punishment are lowest. In order to counter this threat, it is important that our anti-money laundering response is flexible, cost-effective and proportionate. These are the characteristics of a risk-based regime.

More information on the Risk-based approach to anti-money laundering.

The FSA has recently made a number of changes to the UK's AML Framework. In particular the FSA's Money Laundering Sourcebook has been deleted to be replaced by high level provisions in the Senior Management Arrangements, Systems and Controls Sourcebook. This change has coincided with the release of updated JMLSG Guidance.

More information on our new money laundering regime.