Money laundering: what it is, how it works, and how Setfords can help 

Author: Jeremy Asher, Senior Consultant Regulatory Solicitor   | Last updated: 19th May 2026

Money laundering is the process of concealing the criminal origin of funds, so they appear legitimate. It undermines the integrity of the UK financial system, exposes businesses and professionals to significant legal and reputational risk, and touches everyday life through property purchases, investments, and professional services. This guide explains how money laundering operates in practice, outlines the legal position in the United Kingdom, sets out practical steps for robust anti-money laundering (“AML”) compliance, and shows how Setfords can support you with clear, efficient processes. Throughout, we draw on the experience of Jeremy Asher, a consultant solicitor who advises clients on anti-money laundering regulations and complex financial crime risks. 

What is money laundering? 

In short, money laundering is the conversion of criminal proceeds into assets that appear to come from lawful sources. Offenders try to distance funds from the underlying offence so they can spend or invest without detection and integrate illicit wealth into the legitimate economy. 

Money laundering has traditionally been described in three stages: 

• Placement: introducing illicit funds into the financial system, for example through cash‑intensive businesses, deposits, or purchases of high‑value goods. 
• Layering: obscuring the audit trail by moving money through multiple transactions, accounts, companies, or jurisdictions to confuse provenance. 
• Integration: re‑entering apparently clean funds into the economy via investments, property acquisitions, or business activities, so they appear legitimate. 

In the UK, the risks of money laundering apply to both regulated firms and individuals. Regulated businesses must meet stringent anti money laundering obligations; failures can lead to criminal liability, financial penalties, and the loss of professional approvals. Individuals may be drawn in unknowingly, for example by allowing their bank account to be used as a conduit (becoming a money mule), or by entering a transaction funded by unexplained wealth. Strong checks protect clients and firms and help safeguard the wider economy. 

Common methods and warning signs 

Criminals adapt quickly to gaps in oversight. Common methods include misuse of cash‑intensive businesses, where high volumes of takings can mask illicit funds; trade‑based schemes using false invoices, mis‑described goods, or over/under‑invoicing to shift value across borders; the use of digital assets and services, such as cryptocurrency exchanges and mixers, to conceal transaction trails; and property purchases to convert large sums into seemingly legitimate assets, sometimes using offshore entities or complex finance structures. 

Red flags for professionals and consumers include: 

• Unusual payment patterns, such as third‑party payments without a clear connection to the client, rapid movement of funds between accounts, or last‑minute changes to payment instructions. 
• Opaque ownership structures, including shell companies or trusts without a clear rationale, lack of transparency about beneficial owners, or reluctance to provide identification. 
• Links to high‑risk jurisdictions, sanctioned countries, or politically exposed persons (PEPs), which require heightened scrutiny. 
• Transactions that do not align with a client’s known income or wealth, especially in cash‑heavy sectors or involving luxury goods. 

Within legal services and conveyancing, sector‑specific risks include unexplained sources of deposit or purchase funds, complex chains of intercompany loans, reliance on cash or crypto proceeds, and pressure to complete quickly without adequate verification. Use of nominees or structures with no clear commercial purpose can indicate layering. Lawyers should be cautious where clients resist customer due diligence, ask for funds to transit a client account without a genuine legal service, or seek to structure transactions to avoid visibility under anti money laundering regulations. 

Looking for advice on a money laundering issue?

If you find yourself caught up in accusations of money laundering, it’s vital to get the right legal advice as soon as possible. Jeremy Asher is a regulatory lawyer with more than 25 years of experience dealing with serious and high-profile cases, and can advise on the regulations of this area of law, and assist those facing accusations.

Reach out today

UK legal and regulatory framework 

UK anti money laundering controls are grounded in several key instruments: 

• Proceeds of Crime Act 2002 (POCA): criminalizes money laundering and related conduct, including concealing, disguising, converting, transferring, or removing criminal property. It also addresses failure to disclose and tipping off. 
• Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended: set out systems and controls for regulated firms, including risk assessments, customer due diligence, ongoing monitoring, and record‑keeping. 
• Sanctions and Anti‑Money Laundering Act 2018 and related regulations: establish UK sanctions regimes, prohibiting dealings with designated persons and requiring screening and asset freezes where applicable. 

Law firms must conduct firm‑wide and matter‑level risk assessments, verify identity and beneficial ownership, assess source of funds and source of wealth, and apply enhanced due diligence (EDD) for higher‑risk situations, such as PEPs or high‑risk third countries. Firms must maintain proportionate policies, controls, and procedures; train staff; retain records; and report suspicious activity through internal escalation and Suspicious Activity Reports (SARs) to the UKFIU at the National Crime Agency. Client accounts must only be used for legitimate transactions connected to legal services, not as a banking facility. 

Non‑compliance with anti-money laundering regulations may lead to criminal prosecution under POCA, regulatory fines, disciplinary action, civil penalties for sanctions breaches, reputational damage, and delays or the unwinding of transactions. Tipping off and prejudicing an investigation are separate offences. Timely internal reporting and adherence to consent regimes are essential to avoid committing further offences and to demonstrate credible AML compliance. 

Preventing money laundering in practice 

An effective anti-money laundering program is risk‑based. Firms assess client and matter risk by considering client type (individual, company, trust), ownership and control structures, geographic exposure, products and services offered, delivery channels, and the value and complexity of transactions. This informs the level of due diligence, monitoring, and senior oversight required and underpins reliable AML compliance. 

Customer due diligence involves verifying a client’s identity and, for entities, identifying and verifying beneficial owners and controllers. It also requires understanding the purpose and intended nature of the business relationship. EDD applies where risks are elevated, including dealings with PEPs, high‑risk jurisdictions, complex structures, or where funds lack clarity. EDD measures may include additionalidentity evidence, corroboration of address and occupation, detailed source of wealth documentation, independent verification, adverse media screening, and senior management approval. 

Ongoing monitoring ensures information remains current and that transactions are consistent with the expected profile. This includes periodic refresh of due diligence, scrutiny of transactions, and screening for sanctions and PEP status changes. Where concerns arise, staff should follow internal escalation procedures, document their assessment, and submit a SAR where appropriate. Records must be retained for prescribed periods to evidence anti money laundering regulations compliance and support investigations. 

Examples and scenarios 

Property purchase scenario: A buyer seeks to complete a high‑value residential purchase under a tight deadline. Funds arrive from several third‑party accounts, including an overseas company with undisclosed owners. Red flags include third‑party payments, opaque ownership, and urgency. Appropriate steps include pausing to complete customer due diligence, identifying and verifying beneficial owners, requesting source of funds and source of wealth documentation (for example, bank statements evidencing accumulation of savings, sale agreements, tax returns), conducting sanctions and adverse media checks, and applying EDD. If satisfactory evidence is not provided, the matter should not proceed, and a SAR may be warranted. 

Corporate acquisition scenario: A UK company acquires a small supplier at an apparently low valuation, financed via layered intercompany loans routed through multiple jurisdictions. The target’s invoices show inconsistent pricing and round‑tripping. Red flags include complex finance without clear commercial rationale, trade‑based indicators, and use of high‑risk jurisdictions. The response includes deeper due diligence on ownership and control, independent verification of trading activity, review of bank flows to corroborate funding sources, and senior approval before proceeding. Where suspicion crystallises, internal reporting and a SAR should be considered. 

Key takeaways: Early risk assessment reduces pressure and prevents rushed decisions. Clear, proportionate document requests help clients understand requirements. Strong internal escalation ensures concerns are assessed by trained compliance staff. Thorough documentation provides an audit trail and supports consistent, defensible outcomes under anti money laundering regulations. 

Current trends and expert insight 

Criminal methodologies evolve with regulation and technology. The interplay between consumer protection and unintended consequences is increasingly scrutinised. Some industry voices warn of displacement, where tighter controls in one area move risk into less supervised channels, including unregulated online platforms. While views differ on the scale of this problem, the compliance lesson is clear: risk rarely disappears; it shifts. 

Firms should remain alert to funds originating from offshore or unregulated sources and ensure enhanced scrutiny where a client’s financial behaviour suggests a move away from regulated channels. Proportionate, risk‑based checks that respect privacy and apply consistently will strengthen AML compliance and help deter money laundering without placing undue burdens on legitimate clients. 

How Setfords can support you 

At Setfords, we operate a robust, risk‑based anti money laundering framework designed to protect clients and comply with UK law. Our approach combines thorough customer due diligence, source of funds and source of wealth checks, and matter‑specific risk assessments. We use reliable electronic verification alongside traditional documents and apply EDD where risk indicators are present, including PEP connections, complex structures, or high‑risk geographies. This practical approach to AML compliance keeps matters moving while meeting the demands of anti money laundering regulations. 

To avoid delays, we explain early what documents may be required. These commonly include: 

• Valid photographic identification and proof of address. 
• Recent bank statements evidencing the route of funds into our client account. 
• Documents explaining the origin of wealth, such as property or business sale agreements, inheritance papers, investment statements, or savings history. 
• Details of beneficial owners for companies or trusts. 
• Information on the purpose and nature of the transaction. 

If you are unsure how to evidence your funds, or your circumstances are unusual, our team can advise on acceptable forms of proof and the most efficient way to present them. We encourage clients to seek legal advice early in any property or corporate transaction, particularly where there are overseas elements or complex funding. Please contact Setfords through our website enquiry form or by telephone; we will respond promptly and guide you through the next steps with confidentiality and professionalism.