Category: General News & Cases

Lastest news concerning AML from press releases and publications

  • Money Laundering Transparency & Trust discussion paper

    HM-TreasuryOn 15 July, Dr Vince Cable, Secretary of State for Business, Innovation and Skills, announced the launch of the Transparency & Trust discussion paper. This sets out a number of proposals aimed at addressing opaque ownership structures and improving the accountability of company directors, to comply with the Money Laundering Regulations.

    The proposed reforms seek to promote growth by improving confidence in the UK as an open and trusted place to invest and do business. Greater transparency and improved trust will mean honest entrepreneurs and investors are more willing to do business in the UK and are not disadvantaged by those who don’t play by the rules.

    Business success, and therefore economic growth, depends on investors, employees, consumers and the wider public having confidence in business. When companies do business with each other, those transactions must also be built on trust.
    An effective and trusted system that identifies and deals with poor business behavior reassures people that we operate fairly, and encourages honest entrepreneurs to invest in activities promoting growth and employment.

    This paper considers a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business, by linking closing with the new Money Laundering Regulations. This will help:

    • prevent illegal activity
    • better enable companies to be held to account
    • provide businesses, investors, employees and consumers with confidence that companies are acting fairly

    The extensive range of proposals to aid money laundering compliance includes;

    • A central registry of beneficial ownership information  to be held at Companies House
    • Extension of Part 22 of the Companies Act extended to all companies, not just PLC’s
    • Validation checks for submissions of beneficial ownership information
    • Proposals to update beneficial ownership as it changes bringing into question the future of the annual return.
    • Making information more publicly available
    • Extending the investigative powers of the 1985 Act to other law enforcement agencies.
    • The abolition of bearer shares.

    Changes will be made to the Companies Act and will be introduced alongside the 4th Money Laundering directive, from which many of the proposals are taken. This joint legislative change will take place 2014/2015.

  • Cyprus damned on money laundering through leaked report

    Almost 60 percent of one of the bailed out Cypriot bank’s clients are “high risk” in terms of money laundering and almost a third of all bank depositors’ records contain errors, according to a leaked EU report.

    The report which was published by the Cypriot website stockwatch.com.cy – was drawn up in April by Moneyval, a unit of the Strasbourg-based Council of Europe, and by accountancy firm Deloitte on the request of eurozone finance ministers.

    The leaked four-page resume paints a damning picture of what goes on in the mini financial centre which just got €2 billion of EU taxpayers’ money. The full version, containing banks and customers’ names, is still firmly under lock and key.

    Deloitte looked at the six Cypriot banks which hold €2 billion or more in deposits. It then looked at 90 of the biggest big borrowers, worth €16 billion in total loans, 180 big depositors, worth €8 billion and a further 120 randomly selected customers.

    When analysing these customers, in terms of doing business with potential crooks, it found that 10 percent of all of them are “politically exposed persons” and that 58 percent of customers in one of the six banks pose a “high risk” on money laundering.

    It came to this conclusion by the information obtained from “simple commercial database checks” even though the banks themselves had failed to flag them.
    In terms of knowing who their customers really are, Deloitte said 27 percent of all depositors’ files and 11 percent of borrowers’ files “showed inaccurate information on the customer and beneficial owner.”

    It noted that banks rely on “introducers” or professional enablers, that is firms of lawyers and accountants who work for the real owners of accounts for 75 percent of their international business, muddying the water on customer identity.

    It added that when dealing with more “complex” structures – that is accounts held by firms with three or more layers of nominal owners between the bank and the real customer – the banks only did proper ID and KYC checks in just 9 percent of cases.

    These banks launched just four internal probes on potential money laundering on the sample clients between 2008 and 2012. They reported zero “suspicious transactions” to Cypriot authorities in 2008 to 2010, one in 2011 and “a few” in 2012.

    But Deloitte identified 29 potential cases of suspicious activity in the last 12 months alone, some of which it described as “very compelling cases.” “Deloitte’s analysis exposes systemic deficiencies in the implementation of preventive measures by the audited institutions,” the leaked report says.

    “Overall awareness regarding clients presenting higher risk profiles was not demonstrated to be robust,” it adds. The paper gives the lie to Cypriot diplomats and politicians who have been telling media in recent months the island adheres to international standards.

    It also casts doubt on the credibility of Moneyval, whose previous reports gave Cyprus a clean bill of health. “While Moneyval was not able to access actual customer files, its findings significantly revise its previous, more favourable assessment of Cyprus’ AML [anti-money-laundering] system,” the report notes.

    Moneyval, as an intergovernmental body, can only look at the work of Cypriot government institutions, which is one reason why the eurozone ministers brought in Deloitte.
    The man who chairs the ministers’ meetings, Dutch finance chief Jeroen Dijsselbloem, has said the EU will draft an “action plan” for Cyprus to enact if it wants to keep the bailout money flowing.

    German leader Angela Merkel in April also promised the Bundestag that she will clean up Cyprus if MPs approved the EU rescue. But the leaked paper risks making her look bad in the run-up to elections in September.  “It could be quite problematic for Merkel. If German people saw the report, they might say: ‘I would not give my money to such a country’,” an EU diplomat told the website.

  • SmartSearch Gains ICAEW Affinity Statue

    ICAEW Member Rewards Partnership

    SmartSearch are the preferred supplier of KYC and AML solutions for the Institute of Chartered Accounts England & Wales, we work with many of the largest Accountancy Firms, providing a total solution for Accounting Firms for Know Your Customer and Customer Due Diligence.

    Business & Individual AML Verifications on a single Platform

    SmartSearch is the only AML Platform of its type where you can perform both Business and Consumer AML checks. Other unique features include email alerts to MLROs when Sanction, PEP or SIP matches are encountered; also included is ongoing monitoring of all enhanced client records.

    The award winning SmartSearch software platform delivers both Business and Individual AML verification services providing major reductions in red tape bureaucracy, time and cost for Client Firms. A Business AML check can be completed in less than 3 minutes, with Individual checks taking as little as 30 seconds. Neither of these processes require documents to be supplied by customers so you can get on with the business of servicing your clients from day one.

    SmartSearch’s Principal Data Partner is Experian providing SmartSearch with access to over 1 billion data items to enable our positive AML verification process. Dow Jones provides SmartSearch with their “Watch List” to enable negative screening of Sanction and PEP checks. SmartSearch updates this Watch List daily which further enables our daily monitoring service.

    ICAEW Affinity

    The SmartSearch has recently been chosen as the Affinity Partner to provide electronic Anti-money Laundering (AML) Verification for the ICAEW. As a consequence of this partnership we have special discounted pricing arrangements for ICAEW Members, simply quote your membership number to us to qualify for this.

    ICAEW Infinnity Logo

  • HMRC to contact businesses registered under the Money Laundering Regulations

    HM Revenue & Customs (HMRC) Anti-Money Laundering Compliance Officers will shortly begin a programme of telephoning businesses registered with, and supervised by HMRC under the Money Laundering Regulations (MLR).

    These calls will be in addition to and will complement ongoing HMRC compliance activity. HMRC will be contacting businesses to make sure that up to date information is held about their activities. The calls will also further improve HMRC understanding of customers and to find out whether they need any additional help.

    HMRC can ask registered businesses for this information under Regulation 37 of the MLR 2007 and this has proved to be a very cost effective way for both customers and HMRC supervisors to conduct its compliance activity.

    During the calls the HMRC officers will confirm their identity and ask businesses for their security information. They will ask for details of business activities, customers and also answer any questions. This will help HMRC decide whether a visit is needed and give businesses the opportunity to clarify any issues they may have.

    The Revenue carrying out these checks by phone as they are quicker and less invasive than personal visits and if done correctly, HMRC should be able to distinguish based on the evidence gained form the phone call, between firms who understand their obligations under the Money Laundering Regulations and those who do not.

    A minority of supervised firms will be not be up to standard on their compliance to MLR obligations, whereby follow-up action by the way of a personal visit may be appropriate.

  • OFT fines Leicester-based estate agent almost twelve thousand pounds

    The OFT, in its first formal Regulatory penalty, has fined Leicester-based IPS Estate Agents Limited £11,844 for failing to comply with anti-money laundering regulations.

    IPS failed to comply with a number of requirements under the Money Laundering Regulations 2007, including those relating to:

    • verifying the identity of customers
    • keeping appropriate records
    • ensuring that relevant staff are aware of the law relating to money laundering and terrorist financing
    • establishing and maintaining appropriate, risk-sensitive policies and procedures.

    The failures relate to the period between March 2010 and October 2011. The OFT visited IPS premises to check compliance with the Regulations in June 2011 and again in October 2011.

    From the scope of the failures for almost all major areas of compliance to the Regulations you can almost conclude that virtually no compliance of any weight was conducted by the firm with no appropriate management policies and procedures for risk management and the subsequent communication and training of any policies to staff members to fulfill their obligations.

    Kate Pitt, OFT Deputy Director of Anti Money Laundering, said:

    ‘This fine sends out a message to all estate agents that they need to have appropriate measures in place to prevent their business from being used for money laundering or terrorist financing purposes.’

  • United Kingdom and Isle of Man to sign enhanced tax information exchange agreement

    United Kingdom and Isle of Man to sign enhanced tax information exchange agreement

    The Government is to sign a tax information sharing agreement with the Isle of Man which will provide HM Revenue & Customs (HMRC) with a range of additional information about potentially taxable income in Manx bank accounts. This is part of a package of measures being developed by the UK and the Isle of Man as part of a shared commitment to combat tax evasion.

    Under the enhanced information exchange agreement, the UK and Isle of Man will automatically exchange a wide range of information on tax residents, on a reciprocal basis. To minimise burdens on financial institutions the agreement will follow, as closely as practicable, the UK-US Agreement to Improve International Tax Compliance and to Implement FATCA. The agreement will be concluded to the same timetable as the agreement currently being negotiated between the Isle of Man and the United States.

    Exchequer Secretary to the Treasury, David Gauke said:

    “This agreement will significantly boost the UK’s ability to tackle cross-border tax evasion. Automatic information exchange is an important tool in boosting HMRC’s ability to clamp down on those who seek to hide their money overseas. Our ground breaking agreement with the US sets a new standard in international tax transparency and today’s agreement between the UK and Isle of Man to move to much greater levels of automatic exchange is the next step in this process.

    “For years people said this couldn’t be done, so I welcome the progress we have made so far with the Isle of Man. We are looking to reach similar agreements with other jurisdictions and are in discussions with Jersey and Guernsey about enhanced information exchange as part of our common commitment to combat tax evasion.”

    Details of the necessary operational and implementation requirements are still being discussed and will be announced in due course.

    When combined with HMRC’s new centre of excellence in offshore evasion and the development of a comprehensive strategy to tackle it, HMRC will be well placed to clamp down even harder on those who evade tax by hiding their money offshore.

     

  • The Government published its changes to the Money Laundering Regulations 2007

    The Government today published its response to its consultation on changes to the Money Laundering Regulations 2007. Following this consultation the Government is now taking forward proposals to reduce the regulatory burden imposed by the current regulations, while strengthening the overall anti-money laundering regime.

    The aim of the changes was to make the UK’s money laundering regime more effective and proportionate, with the proposed changes saving firms around £3 million a year. Relevant regulatory changes will take effect from 1 October 2012.

    Criminal Offences
    The Government has decided to keep the criminal penalties in the Regulations. The consultation highlighted key risks inherent in their removal and there is insufficient evidence to indicate that removing them would achieve either the UK’s policy objectives or address the concerns raised. Indeed, the balance of responses indicates that ‘over-compliance’ behaviour is also influenced by other factors that would not be addressed by removing the penalties. For example, businesses may adopt risk-averse and tick-box approaches if it is more cost-effective for them to do so, in the absence of clear and unambiguous guidelines for front line staff, in order to prevent fraud or in order to comply with other legislation including financial sanctions.

    The Government reiterates the point made by the CPS that it is not in the public interest to prosecute employees of regulated businesses for minor, procedural or accidental regulatory failures.

    Reliance Purposes
    The Government is proceeding with the removal of the distinction between Part 1 and Part 2 bodies. Based on recent and continuing work with Supervisors, it is considered that they are discharging their role satisfactorily and that the proposed change is advisable. This was further confirmed in HM Treasury’s first Annual Report on Supervision1. As suggested in some responses, any new supervisors will be placed in Part 2 until they demonstrate ongoing, robust and effective supervision of their members.

    Small Business Exemptions from the Regulations.
    The Government does not propose to introduce an exemption based on the size or turnover of a business, as it acknowledges the absence of a positive correlation between the size of a business and the money laundering risk it represents. The Government also recognises the risk of the exemption leading to ‘smurfing’ and other criminal practices; and the practical difficulties of introducing such a measure.

    The Government understands the ongoing issues faced by some exceptionally small businesses in relation to the costs of compliance and supervision. Supervisors are encouraged to ensure that the risk-based approach translates into effective, differential treatment in terms of the burden of requirements and, where possible, the fee levied.

    Other Changes to be made include;
    Overseas estate agents are to be bought within the Regulations. The UK is required to regulate all estate agents in order to ensure they minimise their vulnerability to money laundering. These businesses should be regulated, both to ensure the UK is fully compliant with Financial Action Task Force (FATF) global standards and EU requirements and because these businesses are at high risk of money laundering.

    Fit & Proper Tests for MSB’s – The EU Directive allows for all criminal conduct to be taken into account. Given the high risk presented by Money Service Businesses (MSBs) and the case made for enabling the fit and proper test to take into consideration all previous criminal conduct, the Government will proceed with this proposal. The MSB sector is a high-risk sector for terrorism financing and money laundering.

    There are a number of issues that have been resolved concerning supervisors’ powers. The widest reaching change is that Government will proceed with the creation of an information-sharing gateway for supervisors. The Government acknowledges the need for safeguards and clarity around the circumstances under which the information can be shared and the nature of the information.

    Given the issue of overlapping responsibilities, the Government considers it essential that a new Supervisor is able to access information from a previous Supervisor when a business/person seeks to register for anti-money laundering purposes.

    A summary of the changes cited as the Money Laundering (Amendment) Regulations 2012 and come into force on 1st October 2012 are;

    • Partly or Wholly Removing Criminal Sanctions & Strengthening Supervisors Powers to Compensate – No Action
    • Removing Distinction Between Part 1 and Part 2 Bodies – Commencement Date 1 October 2012
    • Extending reliance to OFT-Supervised Debt Purchasers – Commencement Date 1 October 2012
    • Introduction of a De-Minimis Exclusion – No Action
    • Exemption of ‘Non-Lending Credit Institutions’ – Commencement Date 1 October 2012
    • Regulation of Estate Agents Handling Overseas Properties – Commencement Date 1 October 2012
    • Clarifying the Definition of Safe Custody Services – The Government response formalises the FSA definition as the one applicable in the UK. FSA to update its website and include in next edition of Financial Crime newsletter
    • Extending Consideration of Previous Criminal Conduct under HMRC Fit and Proper Test – Commencement Date 1 October 2012
    • Introducing Right of Appeal for HMRC Fit and Proper Test – Commencement Date 1 October 2012
    • Clarifying Supervisory Powers – Commencement Date 1 October 2012
    • Creating an Information Gateway for Supervisors – Commencement Date 1 October 2012
    • Regulating to Penalise Misused of HMRC name and logo by Regulated Businesses – HMRC to monitor this abuse and inform HMT if measures to mitigate it are not working.
    • Appointing the FSA as the Supervisor for Recognised Investment Exchanges – Commencement Date 1 October 2012
    • Removing Regulation 18 – Commencement Date 1 October 2012

    Other Changes to the Regulations which were a part of the proposals of the review and call to evidence which are deferred Subject to Revisions to the EU Third Money Laundering Directive expected early 2013

    • Improving Wording on Beneficial Ownership
    • Streamlining the Supervision of E-Money Issuers
    • Appointed Representatives
    • Pooled Client Accounts

  • Memorandum of Understanding between HMRC and the FSA for joint supervision

    A Memorandum of Understanding between HMRC and the FSA was published on the FSA website on 1 June 2012. It’s about sharing information and joint visits. This will be of particular relevance to many money services businesses whom are supervised not just under the Money Laundering Regulations by HMRC but are also the FSA by the Payment Services Regulations.

    Businesses that are supervised by HMRC and the FSA will find this information useful. The memorandum documents the co-operation between the two organisations for monitoring and the execution of supervisory visits and functions.

    In preparing their Memorandum of Understanding the FSA and HMRC have had regard to the Statutory Code of Practice for Regulators1 which came into force on 6 April 2008. The Code sets out general principles by which regulatory activity should be undertaken, and provides the following guidance on the arrangements for collaboration between different regulators in paragraph 6.5 as follows:

    “Where two or more inspectors, whether from the same or different regulators, undertake planned inspections of the same regulated entity, regulators should have arrangements for collaboration to minimise burdens on the regulated entity, for example, through joint or co-ordinated inspections and data sharing”.

    Relevant businesses will have no increase in their burden for supervision, but enjoy a far more joined up approach from the supervisory authorities helping to ease the process.

    The Memorandum details co-operation concerning;

    • The disclosure of confidential information
    • Single points of contact
    • Joint visits

    The full document can be found by clicking on the following link;

    Memorandum of Understanding between HMRC and the FSA (PDF 54K) (Opens new window)

  • Landmark decision in Shah v HSBC Private Bank brings welcome relief for firms

    After four and half years, six reported decisions, three trips to the Court of Appeal and 27 days of trial, the High Court of Justice has today dismissed in its entirety Mr Shah and his wife’s claim for over US$300m against HSBC Private Bank (UK) Limited. This is a landmark decision that confirms a bank’s right to delay execution of a customer’s payment instructions and refuse to provide information in circumstances where the bank has a suspicion of money laundering that has been notified to the Serious Organised Crime Agency (“SOCA”).

    Berwin Leighton Paisner LLP reporting on the case state that Mr and Mrs Shah (the “Claimants”) were customers of the Bank. Between 20 September 2006 and 28 February 2007, the Bank delayed the execution of four separate payment instructions given by the Claimants, including an instruction to transfer approximately US$28 million. The reason for the delay was that the Bank held a suspicion that the funds in the Claimants’ account were criminal property and it had therefore made an authorised disclosure to SOCA seeking consent to make the payments. In each case, whilst the Bank was waiting for a response from SOCA (SOCA has 7 working days to respond), the Bank told the Claimants that it was complying with its statutory obligations but declined to provide any further information to the Claimants or their solicitors. Once consent had been given, the Bank complied with the payment instructions except for one instruction which the Claimants had previously cancelled.

    The Claimants lodged a claim against the Bank for breach of contract contending that the Bank’s failure promptly to carry out the payment instructions and to explain the reasons for not doing so had caused them substantial losses (over US$300m) in Zimbabwe. It was alleged that, upon hearing rumours that Mr Shah was suspected of money laundering in the UK, the Zimbabwean authorities became suspicious, froze and then seized Mr Shah’s assets.

    At trial the court was required to consider the following key questions:

    Did the Bank suspect money laundering? and
    Did the Bank have a duty to provide information about the delay?

    Mr Justice Supperstone of the Queen’s Bench Division rejected the Claimants’ claim in its entirety.

  • Coutts fined for failings in money laundering controls

    Private bank Coutts has been fined £8.75m by the Financial Services Authority (FSA) for not taking adequate measures to prevent money laundering. The FSA said the failings “resulted in an unacceptable risk of Coutts handling the proceeds of crime”.

    The findings related to high-risk people, especially those whose political positions meant they were vulnerable to corruption. Coutts clients include the Queen, pop stars and sports personalities. It is owned by Royal Bank of Scotland.

    Coutts agreed to settle at an early stage in the process. It said it was confident that its anti-money laundering processes were now robust.

    “Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings,” said Rory Tapner, chief executive of the wealth division of Royal Bank of Scotland. “We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”

    The fine followed the FSA’s visit to Coutts in October 2010 as part of its review into how banks were managing situations in which there was a high risk of money laundering. The regulator said that Coutts had failed to check the source of funds when prospective new clients tried to open accounts. It also failed to check up on any intelligence about its existing or prospective clients and had not kept information on those clients up to date.

    The FSA said there had been deficiencies in nearly three quarters of high-risk customers’ files.

    “Coutts’ failings were significant, widespread and unacceptable,” said Tracey McDermott, the FSA’s acting director of enforcement and financial crime. “Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.”