Category: General News & Cases

Lastest news concerning AML from press releases and publications

  • Offshore Assets

    Offshore Assets

    HMRC has published guidance on a letter which tax advisers and financial institutions may need to send to clients who have income or assets overseas, explaining its wider powers to exchange tax information with other jurisdictions and urging anyone who is in doubt about their offshore tax position to seek advice

    Accountants and tax advisers should also have regard for companies they act for that have an offshore or overseas shareholding, especially from recognised tax havens such as BVI or the Channel Islands. Advisers should be aware that this type of company may not have been declared to them. This again will extend to clients who may own overseas properties through overseas companies.

  • Money Laundering Supervison

    Steve O’Neill reviews the latest statement concerning Money Laundering Supervision

    The UK’s supervisory approach to compliance of obliged entities to the Money Laundering Regulations were branded “woefully inadequate” and are failing to block “corrupt money” and terrorist funds, an anti-corruption body has warned.

    This statement was made by Transparency International UK who went on to say billions of pounds of “dirty cash” is entering Britain every year. They state that this is partly due to a fragmented network of regulators means that only a very small amount is being investigated. (more…)

  • EU’s Fourth Anti-Money Laundering Directive

    This is the first of a number of posts, looking at the implications EU’s Fourth Anti-Money Laundering Directive on the UK’s Regulated Sector

    Obliged Entities

    This is the logical place to start for a business within the scope of the Regulated Sector of the UK Money Laundering Regime, ‘Obliged Entities’ is a new term being used to describe you, whether you are natural person, (that is an individual) or operate within a partnership or a company structure or any other type of legal person including trusts.  This term ‘obliged entities’ is introduced to describe those businesses to whom the directive applies. (more…)

  • CCAB issues a reminder for practitioners to stay vigilant over money laundering

    Staying safe within the money laundering regulations

    With the latest budget heralding a clampdown on tax evasion, accountants in practice would do well to consider the first-aider’s rule when acting for clients.

    Ask any first aider about helping others and the first rule is: don’t put yourself in danger when trying to assist others. Think and check before jumping in the water to save the drowning man.

    An accounting service provider (practitioner) is subject to the money laundering regulations, which impose obligations of diligence and reporting on the member – where failure to comply can lead to criminal proceedings against the practitioner.

    Test the water before entering

    The first-aider would look at the water and assess his competency as a swimmer given the turbulent nature of the water. Are these choppy waters too great a risk? For the practitioner, this means that he has to consider his competence in the first instance by assessing the skills and experience he needs to deliver the service the client wants.

    Know who you are dealing with

    Although this may sound odd, the second thing the first-aider does is communicate and fact-find in order to assess the situation. This may have a bearing on how, or even if, the first-aider can assist.

    In money laundering terms this means knowing your potential client, and if it is an entity, then finding out who is behind it and who is taking the benefit from it. Making sure you have a record of that evidence is very important – and your only proof you have complied with the regulations.

    Watching for rocks and sharks

    The first-aider is ever alert to their surroundings and the changing circumstances to ensure they can react and adapt the rescue plan in order to manage the danger to them or the person they are trying to help.

    For the practitioner this means being alert for unusual events and transactions or results that implicate the client as perpetrator, facilitator or victim of a crime. The practitioner needs to ensure and evidence that all staff are trained in money laundering and that all suspicions are reported to the money laundering reporting officer (MLRO) who will make the decision whether to report to the National Crime Agency. Does the MLRO who receives no reports have poorly trained staff, rather than really safe clients?

    In addition, the initial client due diligence has to be refreshed each assignment and any changes to the evidence that is relied upon should be recorded. Where is the documentary support that this is still the most appropriate ongoing due diligence? A note confirming consistency with current file data each year should be made.

    Dialling 999

    The first-aider should dial 999 before entering the water but may not – and would assess the condition of the person in the water to see whether it was warranted.

    The reporting obligation imposed on the practitioner on the other hand is a bit more complex and onerous since it is a crime to fail to report. So when should the practitioner report? The regulations provide that the practitioner must report if, during the course of his business as an accounting services provider he becomes suspicious of there being a crime with proceeds.

    Professional scepticism should prevail. While he is not obliged to do anything extra as part of the money laundering regulations, he is required to be aware of the potential for money laundering or terrorist financing. That involves keeping an eye on the transactions during the course of the work and ensuring that they appear consistent with what he would expect to see, given the knowledge of the client.

    These transactions might, for example, involve the client’s staff stealing from the client, or some sort of tax evasion.

    Reports to the MLRO should be monitored and the decision whether to report documented. Where no report is made, this situation is monitored going forward in order to react, should further evidence come to light.

    A cry for help with a nasty twist

    Where the client comes to the practitioner to say “I’ve done wrong” (perhaps they have not  declared income which is in an undeclared overseas account), and “what do I do?” (seeking advice as to what to do under the law in order to regularise their affairs): does the practitioner help the client and still report them or does he apply the privilege reporting exemption?

    This is not the legal privilege we generally think of but a special privilege under the money laundering regulations. It is important to get legal advice confirming the position before taking the decision to report or not.

    If in doubt, seek advice from your professional body.

    In summary: you should:

    • know your client and their business;
    • appoint a MLRO and train your staff as to their obligations;
    • record and monitor evidence of the client’s identity;
    • monitor money laundering identity evidence and reporting to MLRO; and
    • record evidence of the MLRO decisions to report or not.

    To discuss your money laundering obligations, contact your professional body.

    You may also consider investing in a package of AML technical resources and/or attending further CPD on the subject.

  • The EU Fourth Money Laundering Directive adopted in June 2015

    The EU Fourth Money Laundering Directive (4MLD) was adopted in June 2015.

    One of the main requirements which are an enhancement over the 3rd directive is that it requires all Member States to hold central registers on company beneficial ownership information from 2017. The UK has been ahead of other Member States in creating its own central register. The directive draws heavily on the UK model although there are some minor differences between the two regimes. (more…)

  • Government announces a new crackdown on corrupt professionals who help criminals

    Lawyers, couriers and accountants could be jailed if they turn a blind eye to criminal activity they profit from, under Home Office plans.
    It wants to see a new offence of “participation in an organised crime group” to target those with reason to suspect they are part of an illegal enterprise.

    This offence is not in replacement of any money laundering offences which may not be picked up by an AML supervisory or lack of supervision. It is in fact an offence which brings the fees or charges or salary earned into play, when they are charged to or paid by an organised crime group for the service or works done.

    The Proceeds of Crime Act in its predicate offences of Money Laundering already has a ‘professionals’ offence under S328, which state;
    A Person Commits an office if: if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.

    The predicate offences of Money Laundering including S328 are applicable to all. S328 is backed up by an objective test of negligence covering the blind eye approach but has not been tested in court. Perhaps it is this weakness of PoCA which has spurred on this new offence.

    Professionals including accountants have already been jailed under S328 for aiding in the money laundering of organised crime groups. In a recent disciplinary tribunal, I was a part of on behalf on one accounting body, the case was to strike off the member upon release from jail after serving time for a conviction under S327 and S328 of the PoCA, for an organised crime group dealing in drugs. The Judge commented as part of his report that there was no evidence that the professional was involved in anything related to the drugs trade, but the laundering of the proceeds only.

    When taking part in the panel for the UK Risk Assessment as part of the FATF recommendations for Government to put in place, each section, be it banker, Government department or law enforcement agency, all had their number one area of concern, for example, tobacco smuggling. However the common number two problem across all strands of law enforcement was the ‘professional enabler’, that is the lawyer, accountant or trust and company service provider who put schemes in place to enable identities of beneficial owners to be kept hidden or help move the proceeds of crime.

    This new offence seems to go one step to the side of the S328 offence, rather than a replacement it is an offence on its own, getting into the ‘administration and management’ functions of the crime group, for those who actively participate in these functions, more knowingly rather than under the a suspicion that wrongdoing may be taking place within their normal practice environment. For example the actual fee charged for the services to an organised crime group will be the profiteering subject to the charge.

    So you would imagine, as with a drug dealer getting charged with his main criminal offence and money laundering, usually S327, the person aiding the crime group would be charged with ‘participation in an organised crime group’ and possibly money laundering, a S327 and/or S328 offence. This would give a better chance of prosecution.

    The Government seems to confirm this point, they say the new offence would also target the “Mr Bigs” in charge of criminal networks who do not always “get their hands dirty”. This seems to be another tool to help law enforcement tackle their problem of the professional enabler more quickly as well.

    However will it be limited to a Mr Big or can it run deeper? When the Cyprus banks were bailed out am investigation was commissioned which discovered that over 70% of the banks customers had not passed any due diligence test and had up to 7 layers of beneficial ownership information crossing various jurisdictions designed to conceal true identities. Most of these opaque structures had been designed and setup by lawyers, accountants and company service providers, these are the very professional enablers law enforcement would like to target.

    Some accountancy and trust and company service provider firms’ setup company structures involving offshore structures often with nominees in place and say to the client there you go do what you want with it, but yet charge reoccurring fees for the maintenance of the company structure.  They enable the beneficial owners to do what they want, even if they are criminals and known to be involved in criminal activity or tax evasion, the agent simply states they are not breaching the Money Laundering Regulations, since they understood the purpose was for legitimate activity and they had verified the identity of the beneficial owner. Prosecution for breaches under the Money Laundering Regulations would only likely carry a civil penalty in these instances.

    Under the new offence criminal sanctions may be taken instead for the fees charged. This again is hinted at in the statements of the Home Office.

    ‘Veneer of respectability’

    “If you are helping to oil the wheels of organised crime, you will be prosecuted” stated Karen Bradley, Home Office minister

    The Home Office believes too many people and corrupt professionals are helping criminal gangs by not asking questions about why their services are required, and later deny any knowledge of the criminal activity when cases reach court.

    It is hoping to target people such as couriers or van hire companies who help to move counterfeit goods, or lawyers and accountants who take a “no questions asked” approach while assisting criminals with services such as writing up contracts.

    Those convicted under the new offence would face up to five years in jail and could be subject to further civil measures.

    Home Office minister Karen Bradley said: “Nobody is above the law. But for too long corrupt lawyers, accountants and other professionals have tried to evade justice by hiding behind a veneer of respectability.

    “This new offence sends out a clear message to those individuals – if you are helping to oil the wheels of organised crime, you will be prosecuted and face being jailed.” The Home Office says it will legislate on the measures as soon as parliamentary time allows.

    So what does this mean to the practitioner, the accountant or bookkeeper facing the day to day problems on the Money Laundering Regulations, where you are used unwittingly by your client or a money launderer for your good name and expertise? In reality there should be no difference, make sure your client due diligence is up to date, leaving no holes, use the tools available to you such as electronic verification when necessary. Ensure your risk assessments of the clients are done and robust enough and reviewed as circumstances dictate.
    A quick note on risk, look for the country risks, does your client trade with overseas jurisdictions or have significant personal flows of money to or from another jurisdiction? Banks when looking at risk and will invariably look at the country risk first.   Remember Spain and Holland have the highest concentration of organised crime groups in the world and many of the targeted criminals in Spain have now moved to South Africa.

    What about those practitioners who are not so robust in their procedures, those who may turn the occasional blind eye to things for a quiet life?  Remember the money launderer will present to you the persona you expect to see before you, the books, records and transactions you expect, all matching the ‘know your client’ information you have, which in many cases is just what the money launderer has told you and wants you to believe. Suspicion is quite often about what you do not see rather than what is presented to you. If you then get involved in opaque company structures, aggressive avoidance schemes or any other areas designed to provide some form of anonymity without proper care as to the true purpose and legitimacy you may well find yourself caught by this legislation.

    For More Information on verifying the client or risk see our pages on Customer Verification

  • HM Treasury issue advice about unsatisfactory money laundering controls

    HM Treasury has issued new advice about risks posed by unsatisfactory money laundering and terrorist financing controls.

    On 14 February 2014 the Financial Action Task Force (FATF) published two statements identifying jurisdictions with strategic deficiencies in their anti-money laundering and counter financing regimes.

    The Money Laundering Regulations 2007 require regulated entities to put in place policies and procedures in order to prevent activities related to money laundering and terrorist financing.

    Higher Risk Jurisdictions

    In response to the statements published by FATF on 14 February 2014, HM Treasury advises firms to:

    Consider the following jurisdictions as high risk for the purposes of the Money Laundering Regulations 2007, and so advises firms to apply enhanced due diligence measures in accordance with the risks:

    Algeria DPRK* Ecuador Ethiopia
    Indonesia Iran* Myanmar Pakistan
    Syria* Turkey Yemen

     

    Take appropriate actions in relation to the following jurisdictions to minimise the associated risks, which may include enhanced due diligence measures in high risk situations:

    Afghanistan* Albania Angola Argentina Cambodia Cuba
    Iraq* Kenya Kuwait Kyrgyzstan Lao PDR Mongolia
    Namibia Nepal Nicaragua Papua New Guinea Sudan Tajikistan
    Tanzania Uganda Zimbabwe*

     

    *These jurisdictions are subject to sanctions measures at the time of publication of this notice which require firms to take additional measures.

     

  • European Parliament to Vote on the 4th Anti-Money Laundering Directive

    European Parliament to Vote on the 4th Anti-Money Laundering Directive

     

    The European Parliament on the 13th February will vote for legislative revisions to the current EU Anti-Money Laundering Directive (AMLD). This is a once-in-a-decade opportunity, the 3rd directive was voted on 17 December 2005. The proposed revised Anti-Money Laundering Directive should have a tremendous impact on the battles against corruption, drug trafficking, tax evasion and a range of other criminal activities all currently facilitated by the ease in which money can still be laundered across Europe today.

    The draft EU AMLD would, in part, require all companies registered in the EU to hold details of who really owns and controls them – their beneficial owners. This might not sound like much but consider this: in Europe less personal information is asked of a company opening a bank account than there is of an individual applying for a driver’s license, to rent a property or to simply obtain a library card.

    As a result, many companies are opened in names not associated with that of the person who really owns or controls them. And once a bank account has been opened in a false name, if illegal activity is suspected it is almost impossible to follow the money laundering criminal money trail back to the true beneficial owner.

    UK Companies Trust and Transparency

    Various reports and analysis of the UK’s system of Companies House receiving all information in good faith, by-passing the Money Laundering Regulations, have confirmed that the trust and transparency of company structures needs to be radically overhauled.

    As such a consultation document for changes to the way companies and Companies House had been released by the UK Government with many proposals concerning the Trust and Transparency of UK Companies. The changes from this consultation will mean bringing amendments to the Companies Act 2006.

    A public register would have made it more difficult for organised crime groups to use UK and other shell companies to launder huge sums of money. Over the last decades, many organised crime groups used UK companies to launder funds whilst many EU and UK citizens have simply used them as part of aggressive tax avoidance or even evasion schemes.

    Last year, the European Commission hired accounting firm Deloitte to look into the effectiveness of the current AMLD. They found that it did not do enough to combat international or even pan-European money laundering schemes.
    One of the short-comings high-lighted in the study was the difficulty in identifying beneficial owners. Not only can the due-diligence be a costly and time-consuming undertaking, but without substantial prohibitive measures in place, the incentive for obliged entities to chase down information about clients is sometimes missing.

    UK To Set Up Public Registers

    The UK has already announced that it will go a step further than other European countries and set up a registry of the beneficial owners of companies. This register will be publicly accessible.

    By sharing company ownership with all interested parties – including banks, law enforcement, journalists, citizens and obliged entities – The UK can ensure that adequate oversight is guaranteed and information is made available to those who need it. Obliged entities will be able to complete customer due diligence, law enforcement will be able to attach names to proceeds from crime, journalists can research political contributions or other questionable or even illegal donations (and many other stories of corruption) and average citizens or small businesses could, for example, know and understand who is behind their partners, suppliers or customers.

    Providing beneficial ownership information to the public registry does not require much from the companies beyond sharing information they should already possess, such as the company beneficial owner’s full name, date of birth, the means of exercising control over the company, contact details and information detailing the legal shareholders.

    SmartSearch Electronic Verification Reporting

    At BTC Corporate and Compliance we offer SmartSearch for AML Verification to our obliged entity customers for their CDD purposes. The SmartSearch platform does both individual and corporate AML compliance reporting. The business reports already highlight beneficial owners within the report and are of the standard of the 4th Directive. Over 1,100 sanctions and warning lists are used by integrating the Dow Jones watch list into all searches and allowing the user to drill down and see the information returned for any negative matches.
    We offer these searches on a non-contractual pay as you go basis.

  • Client Due Diligence – Beneficial Ownership list to be public, PM states

    David CameronA list of “shell” companies where firms keep money offshore will be published to discourage tax evasion, David Cameron has announced, making changes to client due diligence for obliged entities.

    Ministers had already announced the register, intended to lift the “cloak of secrecy” around company ownership contained within the consultation document for ‘Trust and Transparency For UK Companies’. This consultation also raised a number areas of weaknesses concerning ownership and control and will affect client due diligence procedures for regulated entities.

    More changes to the way UK companies declare ownership and control will be made by amendments to the Companies Act 2006 to bring the requirements in line with the fourth European Directive on Money Laundering and updated European Data protection Act, both expected to clear the European Parliament early 2014.

    The prime minister said making the register public will make it easier for firms and developing countries to know who they are doing business with. Labour, anti-corruption campaigners and charities welcomed the move.

    Speaking at the Open Government Partnership summit in London, Mr Cameron said a small minority of companies have hidden their business dealings in a “complex web of shell companies” for too long.

    Untraceable Trails

    “This cloak of secrecy has fuelled all manner of questionable practice and downright illegality,” he said.

    “Illegality that is bad for the developing world – as corrupt regimes stash their money abroad under different identities.

    “And illegality that is bad for Britain’s economy too – as people evade their taxes through untraceable trails of paperwork.

    “Not only is this hugely unfair to the millions of hard-working people in Britain who pay their tax but it’s also bad for business.”

    Mr Cameron made tax transparency a key issue at the G8 summit earlier this year, and he will say he is “delighted” to announce the “central register of company beneficial ownership” will be publicly available.

    World leaders discussed tax avoidance and evasion at the G8 earlier this year

    He will also urge other world leaders to live up to commitments they made at the summit in Northern Ireland.

    Shadow treasury minister Shabana Mahmood welcomed the announcement of the public register but said the government must go “much further to tackle tax avoidance”.

    “With the amount of uncollected tax rising in the last year to £35bn, it’s clear this government is failing,” she said.

    She accused the government of failing to close tax loopholes and said it should be “doing more to open up tax havens”.

    There is a distinction between tax avoidance – legal measures to avoid paying tax – and illegal tax evasion.

    Getaway cars

    Roger Barker, of the Institute of Directors, also welcomed the move, saying it was “right that the true owners of companies should be transparent both to the company itself and the wider business community”.

    He added: “Significant practical challenges remain in order to ensure that any register of beneficial ownership is accurate and robust, but we support government efforts to begin this process”.

    Gavin Hayman, of anti-corruption campaigners Global Witness, said: “Anonymous shell companies are the global getaway cars for crime, corruption and tax evasion.

    “Full credit should go to the prime minister and the business secretary (Vince Cable) for acting to take away the keys.”

    And Chris Bain, director of aid charity Cafod, said: “It is both the right thing to do as it will support the global fight against money laundering and tax evasion, and also shows that the government has listened to public opinion.”

    He said the register would be “vital” for those fighting to prevent money intended for poverty eradication being “siphoned off”.

  • Suspicious Activity Reports

    National crime Agency takes over the Suspicious Activity Reports regime 

    The UK’s response to the threat from serious and organised crime will be transformed today as the new National Crime Agency (NCA) becomes operational.

    The UK financial intelligence unit which was part of SOCA has now been absorbed into this new law enforcement structure. For obliged entities under the Money Laundering Regulations you will still file your suspicious activity reports online by visiting http://www.nationalcrimeagency.gov.uk/ and then click Reporting SARs in the top right hand corner. The old SOCA website address will automatically forward you to the new web address.

    NCA Background

    For the first time, a single law enforcement agency will be responsible for  leading the national response to cut serious and organised crime – from smashing multi-million pound, cross-border criminal networks and gangs and cracking intricate global cyber-crime, to tracking down child sex abusers in the hidden web and uncovering some of the most complex international fraud.

    The NCA will use its 4,000 plus officers to harness the expertise and resources of law enforcement across the UK and abroad, to ensure a consistent and co-ordinated approach to continuously disrupt the most serious criminals and groups.

    It will hold the single authoritative intelligence picture of serious and organised crime affecting the United Kingdom, and have the mandate and powers to lead and co-ordinate the police and other law enforcement agencies.

    The NCA will lead the whole of the UK’s fight to cut serious and organised crime, ensuring that such criminals and criminal groups are prioritised and that proportionate operational activity and disruption is directed against them, both at home and overseas.

    The Agency will comprise four commands: Organised Crime, Economic Crime, Border Policing and CEOP (Child Exploitation and Online Protection) and have a National Cyber Crime Unit to reflect the broad range of threats that are posed by serious and organised criminals.

    Keith Bristow, Director General of the National Crime Agency said:

    “The NCA is a UK-wide crime-fighting agency, which will have the capability to tackle serious and organised crime in areas that have previously had a fragmented response, such as the border, cyber and economic crime, and those where we need to increase our impact, like child protection and human trafficking.

    “The NCA will be at the centre of a reformed policing landscape that will co-ordinate the fight against some of the United Kingdom’s most sophisticated and harmful criminals.”

    Announcing the launch of the new National Crime Agency, Home Secretary Theresa May said:

    “I want to make Britain a hostile environment for serious and organised criminals, with the new National Crime Agency leading that fight.

    “For the first time we now have a single national agency harnessing intelligence to relentlessly disrupt organised criminals at home and abroad with its own warranted officers, and the power to lead officers from other law enforcement agencies in coordinating that activity.

    “The new National Crime Agency will mean that there will be no hiding places for human traffickers, cyber criminals and drugs barons.”