Operation Machinize and the dirty cash behind the clippers

What looks like an ordinary high street barbershop might, in fact, be a front for a transnational criminal network.

Cash-intensive businesses and their red flags

This month the UK’s National Crime Agency conducted a highly organised crackdown on cash-intensive high street businesses over a three-week period under the name "Operation Machinize".

This operation aimed to put a stop to criminal organisations purchasing small cash-intensive businesses like barbershops, takeaway joints, vape stores and corner shops, and using the proceeds derived from their illicit activities such as drug trafficking and distribution, modern slavery and human trafficking and organised immigration crime.

The operation uncovered a disturbing scale of abuse. Over £1 million held in bank accounts was frozen and nearly 100 individuals were identified and safeguarded as potential victims of modern slavery. Yet this may only scratch the surface.

The question that looms over this discovery is clear: why are these types of businesses repeatedly used as vehicles for laundering criminal proceeds?

Because they tick every box for an ideal money laundering front:

• High-volume low-trace cash flow
  A barbershop taking in £10,000 a week in cash raises no eyebrows unless no one ever seems to get a haircut.
• Minimal overhead and no audits
  Cash takings can be inflated or entirely fabricated with little scrutiny.
• Rapid setup and turnover
  When scrutiny does arise the business can be closed and replaced just as quickly.

The Companies House loophole

It is shockingly easy to set these businesses up.

At present, setting up a UK company via Companies House takes just minutes and £12. There's no robust verification process for directors or shareholders and nominee shareholding is routinely exploited to conceal beneficial ownership.

The UK government has acknowledged this vulnerability and reforms are coming. Under the Economic Crime and Corporate Transparency Act, authorised corporate service providers (ACSPs) such as law firms, accountants and company formation agents will soon need to verify and report accurate beneficial ownership information.

"Reforms are coming. Law firms, accountants and company formation agents will soon need to verify and report accurate beneficial ownership information."

While a positive step, it will likely not be enough. Sophisticated actors adapt swiftly and legislation alone cannot stem the tide. The onus remains on compliance professionals to scrutinise beyond the paperwork.

Professional enablers in the crosshairs

Law firms and accountants aren’t just gatekeepers. They're often the unwitting facilitators of these operations.

A new client walks in wanting to set up a chain of barbershops or American sweet shops. They provide ID, some incorporation documents and perhaps a cash deposit to secure services. It appears innocuous. But behind that glossy business plan could be a network of coercion and crime.

Without robust enhanced due diligence, these gatekeepers risk becoming complicit. The stakes are not merely reputational. In some cases, legal liability could follow.

Red flags: when the clippers don’t add up

For reporting entities, here are some tell-tale signs that a client or business may not be what it seems.

Business model red flags

• A cash-intensive business with no website, reviews or digital presence
• Sudden purchase of multiple similar businesses (for example, five barbershops across different cities)
• Ownership or directorship linked to other known or suspected high-risk entities.

Behavioural red flags

• A reluctance to provide background information, source of funds or UBO details
• Over-eagerness to pay upfront in cash or cryptocurrency
• Frequent changes in directors or shareholders shortly after incorporation

Operational red flags

• Apparent low footfall or non-existent customers despite high reported revenue
• Unusual or suspect staffing practices (such as employees with no formal contracts or who do not speak English)
• Connections to high-risk jurisdictions with weak regulatory frameworks or politically exposed persons

What compliance teams should be doing

Firms must not view compliance as a box-ticking exercise. Proper scrutiny involves proactive risk-based inquiry and an understanding of how illicit networks evolve. Here are practical steps compliance teams can take.

Go beyond the paperwork

Always verify the source of funds and wealth, especially when a newly incorporated company is purchasing businesses or assets outright.

Understand the business model and industry norms

Does the client’s revenue claim match the foot traffic or market demand? If it’s a cash-intensive business, is there sufficient traceability?

Apply risk-based scrutiny to ACSP and professional services clients

If your client is a law firm, trust company or accountant forming entities or trusts, monitor for patterns or clusters of high-risk business registrations.

Use screening and ongoing monitoring tools

Initial checks aren’t enough. Entities change hands and red flags can emerge over time. Tools like First AML's ongoing monitoring and enhanced UBO unwrap can surface risks before they snowball.

Conclusion: suspect barbers

The neighbourhood barbershop might offer more than a shave and a trim. There’s a chance it may be the centrepiece of a money laundering operation that spans borders and exploits lives. Operation Machinize has shed light on a deeply embedded problem but sustained vigilance will be required to prevent a resurgence.

When setting up a company is easier than subscribing to a streaming service, the barriers to financial crime remain perilously low. The duty to protect the system and its people lies with those who choose not to look the other way.