With the agreement of Richard Braysher of 2 High Road, Eastcote, Pinner, Middlesex, HA5 2EW, the Investigation Committee made an order that the member be severely reprimanded, fined £5,000 and pay costs of £1,280 with respect to a complaint that:

1 Between 28 September and 3 March 2010 Mr Braysher failed to comply with written assurances he had given on or about 28 September 2006 following a Quality Assurance Visit that he would:

Under the Money Laundering Regulations 2007:
a. have procedures in place to perform on-going client due diligence;
b. attend external training on the money laundering regulations and;
c. undertake a compliance review.

The Court of Appeal in London ruled on 13 October that HSBC Private Bank did not have to disclose the identity of employees who had made internal reports which had led to suspicious activity reports (“SARs”) being filed with the authorities unless there was a firm suggestion on bad faith on their part.

The judgment is the result of satellite litigation arising from the more famous 2010 case of Shah v HSBC, in which the Court of Appeal ruled that parties which had suffered loss as a result of SARs being filed were entitled to demand proof from the regulated institution responsible that the suspicion on which the SAR was founded existed.

On the particular facts of the original case, the High Court ordered HSBC to identify the employees by function, but not by name. The Shahs appealed the court’s refusal to order the disclosure of the names of the employees, and HSBC cross- appealed against the court’s finding that its obligation to make standard disclosure required their names to be revealed in the first place (with the names only being protected by PII, and not as of right).

The Judgement of the Court of Appeal
Within HSBC there were three stages of AML reporting:
1. The relationship manager with a particular client would report any AML suspicion to the compliance department;
2. The compliance department would report the matter internally to the MLRO;
3. The MLRO would then, if appropriate, file an SAR with SOCA.

HSBC had disclosed a series of memos, internal reports, and similar documents. With the exception of the MLRO, the identity of all employees concerned had been redacted; they were identified only by the department (client relationship, compliance or MLRO) that they worked for. The documents did however reveal the information based on which the MLRO formed his suspicion.

The Test for Disclosure

The court found that the redacted identities of the employees concerned was not material on which HSBC relied to prove its case. As a result, the relevant question was: is the material either material which would adversely affect HSBC’s case or material which would support the Shahs’ case?
In answering the question it was important to remember that the issue remaining in the wider case of Shah v HSBC after the previous decision of the Court of Appeal was a narrow one: did HSBC have a genuine suspicion at the time when the SARs were filed? Accordingly, the Shahs did not put forward a positive “case”; they simply sought to test the bank’s case that it did have such a suspicion. For that reason, the court ruled that the only circumstance in which the employee identities would be disclosable was if they adversely affected HSBC’s case.
The Shahs had stated that two employees of HSBC (“Ms S” and “Mr J”) might have had the motivation to make an internal AML report in bad faith. One had asked for a loan from Mr Shah and been refused; the other had received an abusive email from him after a transaction had been delayed. The Shahs submitted to the court that if any of the anonymous employees concerned in making an internal report turned out to be Ms S or Mr J, they might be able to allege bad faith.

Refusing disclosure, Lord Justice Lewison commented:
The more I listened to the explanation of why the claimants wanted the names, the more convinced I became that, to use the familiar cliché, this was a fishing expedition… [the Shahs] did not say that even if Ms S’s name was revealed as one of the sources [the Shahs] would be able to assert bad faith; merely that they might be able to do so. Even that possibility was only tentatively advanced. It is all speculation and surmise.

The court concluded that, absent a firm suggestion of bad faith by the Shahs, HSBC was entitled to withhold the identity of the staff concerned as being irrelevant to the matter under dispute. For that reason, the bank did not have to rely on the doctrine of public interest immunity.
Conclusion

This important judgment provides reassurance to employees of firms in the regulated sector of England and Wales that their identities will be protected if they make internal AML reports, unless there is a firm suggestion that in doing so they acted in bad faith. It also makes clear that there is no absolute requirement to disclose the identity of the MLRO who makes an external SAR, although as a regulated firm is now required to show that it had suspicion if its reporting is challenged, it may be that it will be necessary for the MLRO (if no one else) to come to court and explain why he made the report that he did.

James Thorburn-Muirhead was sentenced on 29th June after a SOCA investigation revealed his links to a drug dealer, his involvement in the theft of clients’ monies and his failure to disclose information under the Suspicious Activity Reports regime.

SOCA’s initial interest was in Muirhead’s relationship with convicted drug trafficker Steven Smith and the suspicion that he was involved in laundering the proceeds of Smith’s criminal activity. However, the investigation soon uncovered other serious offences.

Muirhead had been operating as a sole proprietor solicitor, trading as Thorburn & Co in the affluent Oxfordshire town. Search warrants executed at his offices and home address in July 2007 resulted in the seizure of several hundred conveyancing files along with accounting records and computers. The evidence linked Muirhead with a drug trafficker, but also pointed to other criminality including the misappropriation of money from clients’ accounts.

In July 2009 Muirhead was charged with 10 counts of theft and false accounting, one count of money-laundering and one count of failing to disclose under the Proceeds of Crime Act. Following a plea bargain offered by his defence team with Muirhead pleading guilty to four counts of Theft and False Accounting and the one count of Failing to Disclose.

Muirhead’s benefit from criminal conduct was agreed at £196,198.00 and a Confiscation Order was made for the same amount, payable within 9 months. A two year default sentence will apply if he fails to meet that deadline, and he will still be liable to pay the sum. He was also ordered to pay a Compensation Order of £12,666.67 and will pay £25,000.00 towards prosecution costs.

On 18 June 2010 the case manager wrote to Mr Honeywell asking him to provide additional information to address the outstanding issues arising from the visit. These are summarised as follows:

Details of the steps he has taken to establish the adequacy of the money laundering procedures undertaken by social services on clients that are referred to him and the basis on which he is able to rely on these procedures

Just before the hearing day, the defendant’s solicitors wrote to the tribunal putting forward various points said to be in mitigation. This included that the Practice Assurance visit had ‘passed’ the defendant’s practice in most aspects and that it was unrealistic to expect the Money Laundering Regulations to apply in relation to clients in receipt of social services funding for their care.

The tribunal did not view either of these points as mitigation. First, Chartered Accountants can be expected to comply with professional standards and partial compliance does not excuse what amounted to a wilful refusal to cooperate with the ICAEW with regard to the areas of non-compliance. In relation to the Money Laundering Regulations, whilst the defendant’s conduct did not amount to the most serious of breaches, the defendant had failed to show any willingness to engage with the ICAEW on this. Had he done so and discussed how he could carry out a modified version of identity checks and thereby compliance, the tribunal might have been more sympathetic.

It was the role of the ICAEW to maintain the standards amongst the profession of chartered accountancy. An important part of this is the Practice Assurance. An equally important part of a chartered accountant’s professional standards and indeed the protection of the public, is compliance of money laundering requirements. The defendant had fallen below the professional standards expected of chartered accountants.

The tribunal ordered that Peter Royston Honeywell FCA be severely reprimanded, pay a fine of £5,000 and costs of £2294

UK Passport

Some 10,000 passports a year are probably thrown in bins, says the UK’s Identity and Passport Service (IPS).  Launching a campaign urging people to keep passports safe, it warns the same number are lost in bars and clubs.

The IPS said it had had reports of passports being stolen at gunpoint in Brazil, lost in jail, and left in the pocket of a coat donated to a tramp.

The IPS based its findings on analysis of applications for replacement passports, which cost £77.50.

Men replace more than 162,500 lost and stolen passports a year compared with about 112,000 by women, the IPS says. Of all the lost and stolen passports in the UK, people in their 20s were responsible for 42.8% of the total – more than twice as many as the next nearest age group. 

Lost and stolen by age

• Teenagers – 6.3%
• 20s – 42.8%
• 30s – 20.8%
• 40s – 12.8%
• 50s – 10.2%
• 60s – 5.3%
• 70s – 1.6%
• 80s – 0.2%

Those in their 30s lost 20.8% followed by people in their 40s, who lost 12.8%.

IPS chief executive Sarah Rapson warned that passports were becoming increasingly attractive to criminal gangs wanting to steal identities.

She said: “It’s really important that you keep it safe both when you are at home and when you’re abroad. “Remember to put your passport away after use. Don’t leave it in a trouser or shirt pocket in the laundry pile.”

Some of the colourful reasons given for why people were parted from their passports include:

• Taxi attacked by gunman on way to airport in Brazil
• Fell out of bag while snowboarding
• Drunk boyfriend (now ex) destroyed it
• Last seen in pocket of a coat donated to tramp
• Wallet stolen at children’s party with passport inside
• Passports stored in safe in Turkish villa, thieves stole safe
• Put in bin by infant daughter; and
• Put on a fire with clothes

The service advised people to keep their passport in a place they can remember and to only carry it when absolutely necessary.

It said people should use alternatives if they needed to prove their age and should keep a note of the number to help speed up the issuing of replacements.

The stark message to Kishor Doshi, director of Sunderland firm Otax, came after he was convicted of an offence under the Proceeds of Crime Act.

The jury of eight women and four men at Newcastle Crown Court took just 30 minutes to reach their verdict, after hearing two days of evidence.
Doshi, of Dunelm South, Sunderland, admitted he rang and told a client that his office had received a police order commanding him to hand over the man’s accounts just hours after he discovered it.

The order relates to a money laundering investigation by Northumbria Police’s Economic Crime Unit, called Operation Galapagos, into the dealings of the man who cannot be named because of a court ruling.

But the 60-year-old told the hearing at Newcastle’s Moot Hall that he did not know the document, called a Production Order and authorised by a judge, related to a criminal investigation and was supposed to be kept secret by law.

Instead, he thought it was part of an ongoing civil inquiry by Revenue and Customs officials and said in interview: “I thought he had a right to know”.

Earlier in the case, the Tanzanian-born businessman, who has been an accountant for 23 years, told the court he only read the first two paragraphs of the Production Order before he made the first in a series of phone calls between him, his client and an associate.
But prosecutor Peter Gair said an accountant of Doshi’s experience would have known a Production Order was a criminal investigation led by police.

Mr Recorder Kershaw adjourned sentencing until next month while reports are prepared.
But he warned Doshi: “I am going to grant you unconditional bail in the mean time, but you must brace yourself for an immediate custodial sentence.”

The register is a useful tool for sharing intelligence about businesses which might be used for money laundering and will help HMRC with its work ensuring compliance and supervision of the Money Laundering Regulations. In particular, it will help law enforcement agencies differentiate between MSBs complicit in money laundering or terrorist financing and those who are complying with the Regulations. In a recent case, for example, the manager of a bureau de change was found to be involved in laundering millions of pounds made from drug trafficking.

If the pilot is successful access to the register will given to law enforcement agencies across the country.

Since November 2008 the UK Borders Agency (UKBA) has issued an ID card to migrants from countries outside the European Economic Area (EEA). From 21 January 2011 this form of identity will no longer be valid. If you are carrying out customer due diligence on or after that date you should not accept an ID card issued by the UKBA as proof of identity under the Money Laundering Regulations.

Acceptable forms of documents, data or information will still include passports and photographic driving licences, as well as a range of other paper based evidence, as well as electonic verification reports

Consent Orders made on 1 June 2010

With the agreement of Andrew Nigel Hamilton of 38 Dean Park Mews, Edinburgh EH4
1ED, the Investigation Committee made an order that the member be severely
reprimanded, fined £2,000 and pay costs of £1,080 with respect to a complaint that:

In February 2007, Mr A N Hamilton FCA acted for X on behalf of his firm, Y, when he
had failed to verify her identity or keep records of the evidence obtained, contrary to
section 18 of the anti-money laundering ‘Second Interim Guidance for Accountants’
D6448

Consent Orders made on 28 July 2010

With the agreement of Michael Martin Shenker of 5Wellesley Court, Apsley Way,
London NW2 7HF, the Investigation Committee made an order that the member be
severely reprimanded, fined £5,000 and pay costs of £2,075 with respect to a
complaint that:

Between 7 June 2005 and 16 February 2006 Mr M M Shenker FCA failed to comply with
statement 1.304 of the Members Handbook in that he failed to make a suspicious activity
report on a timely basis to the National Crime Intelligence Service when he had a
suspicion or reasonable grounds to suspect that Mr X’s activities in relation to the
business of Y Limited were unlawful. D6496