Behind Closed Books: An Investigation of Money Laundering in Insolvency Proceedings

• In Event: Emerging Money Laundering Methods: The Impact on Criminal Offenders and the Role of Enablers

Abstract

This study explores the money laundering risks affecting the UK insolvency sector. As insolvency proceedings increase, so do opportunities for criminal activities, especially through injecting illicit funds into distressed companies during liquidation or restructuring. Although the 2020 UK National Risk Assessment identified insolvency proceedings and insolvency practitioners as targets for money launderers, research on specific money laundering risks in this sector is limited. The research question of this paper is: what are the key money laundering risks of the UK insolvency sector, and how can AML compliance be improved? A qualitative research methodology was used, involving analysis of current UK insolvency policies, AML regulations, and relevant reports from supervisory bodies and the 2020 National Risk Assessment. The study identifies regulatory gaps and challenges regarding AML compliance in insolvency. For instance, our findings show that reliance on external financing during insolvency proceedings facilitates money laundering, and limited collaboration between regulatory bodies and insolvency practitioners further affects AML implementation. Ultimately, the authors identify key areas for reform, including enhancing training for insolvency practitioners and cooperation among regulators, policymakers, and stakeholders to safeguard insolvency proceedings from criminal infiltration.

Authors

• Ilaria Zavoli, University of Leeds (UK)

• Oriana Casasola, University of Leeds (UK)